INFLUENCE INC, S-1, 1996-08-19

INFLUENCE INC
S-1, 1996-08-19

Previous: SMARTALK TELESERVICES INC, S-1, 1996-08-19

Next: SEPARATE ACCOUNT KGC OF FIRST ALLMERICA FIN LIFE INS CO, N-4 EL, 1996-08-19

<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 19, 1996
REGISTRATION NO. 333-

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
----------------
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
----------------
INFLUENCE, INC.
(Exact Name of Registrant as Specified in Its Charter)

DELAWARE 5047 13-3798523
(State or other (Primary SIC Code) (I.R.S.
jurisdiction of Employer
incorporation or Identification
organization) No.)

601 MONTGOMERY STREET, SUITE 845
SAN FRANCISCO, CALIFORNIA 94111
(415) 421-5600
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)

PETER A. BICK, M.D.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
INFLUENCE, INC.
601 MONTGOMERY STREET, SUITE 845
SAN FRANCISCO, CALIFORNIA 94111
(415) 421-5600
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
----------------
Copies to:

STEVEN G. TEPPER, ESQ. HOWARD S. ROSENBLUM, ESQ. TESTA,
ARNOLD & PORTER 399 HURWITZ & THIBEAULT, LLP HIGH STREET
PARK AVENUE NEW YORK, TOWER 125 HIGH STREET BOSTON,
NEW YORK 10022 (212) MASSACHUSETTS 02110 (617) 248-7000
715-1000

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.

If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 (the "Securities Act"), check the following box. [_]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]

CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TITLE OF EACH CLASS
OF SECURITIES PROPOSED MAXIMUM AMOUNT OF
TO BE REGISTERED AGGREGATE OFFERING PRICE(1) REGISTRATION FEE
- -------------------------------------------------------------------------------
<S> <C> <C>
Common Stock, par value per
share $0.001 $40,250,000 $13,880
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1)Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(o) of the Securities Act of 1933.

----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED AUGUST 19, 1996

[INFLUENCE LOGO]

COMMON STOCK

All of the shares of Common Stock, par value $.001 per share (the "Shares" or
the "Common Stock") being offered hereby (the "Offering"), are being offered by
Influence, Inc., a Delaware corporation. Prior to the Offering, there has been
no public market for the Common Stock. It is currently anticipated that the
initial public offering price will be between and per Share. See
"Underwriting" for a discussion of the factors to be considered in determining
the initial public offering price. Influence will apply for listing of the
Common Stock on the Nasdaq National Market ("Nasdaq") under the symbol "INFL".

AN INVESTMENT IN THE SHARES OF COMMON STOCK OFFERED HEREBY INVOLVES A HIGH
DEGREE OF RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 5 FOR A DISCUSSION OF
CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE
COMMON STOCK.

-----------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Underwriting Discounts Proceeds to
Price to Public and Commissions (1) Company (2)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share................... $ $ $
Total (3)................... $ $ $
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) See "Underwriting" for information regarding indemnification of the
Underwriters and other matters.
(2) Before deducting expenses payable by the Company, estimated at $1,000,000.
(3) Influence has granted to the Underwriters a 30-day option to purchase up to
additional shares of common stock solely to cover over-allotments, if any.
If the Underwriters exercise this option in full, the total Price to
Public, Underwriting Discounts and Commissions and Proceeds to Company will
be $ , $ , and $ , respectively. See "Underwriting."

The shares of Common Stock offered by this Prospectus are offered by the
several Underwriters named herein, subject to receipt and acceptance by them,
and subject to their right to reject any order in whole or in part and to
withdraw, cancel or modify the offer without notice. It is expected that
delivery of the certificates representing such shares will be made against
payment therefor at the office of Montgomery Securities on or about ,
1996.

-----------

MONTGOMERY SECURITIES

UBS SECURITIES
VOLPE, WELTY & COMPANY

, 1996
<PAGE>

<TABLE>
<CAPTION>
INFLUENCE PRODUCT DEVELOPMENT OVERVIEW
- -----------------------------------------------------------------------------------------------------------------------------------
PROPOSED REGULATORY
PRODUCT DESCRIPTION PRODUCT STATUS PATH
- -----------------------------------------------------------------------------------------------------------------------------------
DIAGNOSTIC DEVICES
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
In-Probe A urodynamics and pres- Ongoing international pilot trial 510(k)
sure recording system
which can quantitatively
record urethral
hypermobility and leak
point pressure.
- -----------------------------------------------------------------------------------------------------------------------------------
In-Tele A small wireless dispos- Preclinical 510(k)
able transmitter that is
inserted into the blad-
der to transmit bladder
pressure data to a belt-
mounted receiver.
- -----------------------------------------------------------------------------------------------------------------------------------
FEMALE THERAPEUTIC DEVICES
- -----------------------------------------------------------------------------------------------------------------------------------
In-Bio A wireless pelvic floor Ongoing international pilot trial 510(k)
training and bio-feed-
back transmitter that is
inserted into the vagina
to measure intra-abdomi-
nal pressure and peri-
neal muscle contrac-
tions.
- -----------------------------------------------------------------------------------------------------------------------------------
In-Tac A minimally invasive 510(k) filed June 1996 510(k)
surgical system for per-
forming bladder neck
suspension surgery in
women with stress incon-
tinence utilizing the
Company's proprietary
bone anchors and anchor
insertion device.
- -----------------------------------------------------------------------------------------------------------------------------------
In-Sure A temporary Preliminary clinical study initiated PMA
intraurethral valved
catheter that functions
as a remote-controlled
artificial sphincter,
providing complete and
controllable continence
for women with stress
incontinence.
- -----------------------------------------------------------------------------------------------------------------------------------
In-Flow A temporary Ongoing international pilot trial 510(k) or PMA
intraurethral valved
catheter containing an
intraluminal pump assem-
bly that functions as a
remotely controlled ar-
tificial sphincter and
urine pump providing
complete and controlla-
ble continence in women
with atonic bladder.
- -----------------------------------------------------------------------------------------------------------------------------------
MALE THERAPEUTIC DEVICES
- -----------------------------------------------------------------------------------------------------------------------------------
In-Sure-M A modified version of Preclinical 510(k) or PMA
the In-Sure remote con-
trolled intraurethral
valved catheter for use
in men with stress in-
continence or post-sur-
gical urinary retention.
- -----------------------------------------------------------------------------------------------------------------------------------
In-Flow-M A modified version of Preclinical 510(k) or PMA
the In-Flow remote con-
trolled intraurethral
valved catheter contain-
ing an intraluminal pump
for use in men with
atonic bladder.
- -----------------------------------------------------------------------------------------------------------------------------------
In-Cuff A permanent, Preclinical PMA
implantable, remote con-
trolled, artificial dy-
namic sphincter.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Influence is a development stage company and all its products are currently
under development. None of the Company's proposed products discussed herein
have been approved by the United States Food and Drug Administration, and
there can be no assurance that such proposed products will receive such
approval on a timely basis, or at all. See "Risk Factors--No Assurance of
Regulatory Approvals; Potential Delays."

INFLUENCE(TM), IN PROBE(TM), IN-TELE(TM), IN-BIO(TM), IN-TAC(TM), IN-
SURE(TM), IN-FLOW(TM), IN-SURE-M(TM), IN-FLOW-M(TM) AND IN-CUFF(TM) ARE
TRADEMARKS OF THE COMPANY.

IN CONNECTION WITH THE OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SHARES AT A
LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN THE OVER-THE-
COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.

2
<PAGE>

[The two fold-out pages contain two separate flowcharts, one for female
patients with urinary problems and one for male patients with urinary
problems. Each flowchart outlines the steps a physician would take in
diagnosing and treating female and male incontinence. The flowcharts also
depict which steps might incorporate the Company's proposed diagnostic and
treatment products, including In-Probe, In-Tele, In-Bio, In-Tac, In-Sure, In-
Flow, In-Sure-M, In-Flow-M and In-Cuff.]
<PAGE>

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and financial statements and notes thereto appearing elsewhere in
this Prospectus. The Company is a development stage company and all its
products are currently under development. The following discussion necessarily
contains certain forward-looking statements which reflect the Company's plans,
estimates and beliefs. The Company's actual results could differ materially
from those discussed in the forward-looking statements. Factors that could
cause or contribute to such differences include those discussed below and
elsewhere in this Prospectus, particularly in "Risk Factors."

THE COMPANY

Influence is engaged in the design, development and commercialization of a
disease management system of products for the diagnosis and treatment of
urinary incontinence in both women and men. The Company's products under
development include diagnostic tools, remote controlled intraurethral valved
catheter systems and proprietary surgical tools and equipment for performing
minimally invasive surgery to restore continence. These products are designed
to address the inadequacies of current diagnostic and treatment options and to
offer cost effective solutions to improve clinical outcomes and increase
patient satisfaction.

Urinary incontinence, the involuntary leakage of urine, is a significant
health problem afflicting approximately 10 million women and 3 million men in
the U.S. It is estimated that 50% of the 1.5 million nursing home residents
suffer from incontinence. The U.S. Department of Health and Human Services
estimated that costs associated with the management and treatment of urinary
incontinence in the U.S. exceed $16 billion annually, including over $5 billion
related to patients in nursing homes. Incontinence may be caused by a wide
range of factors, including childbirth, menopause, surgery, obesity, drugs and
neurological damage. Incontinence patients suffer from a variety of physical
and psychological problems including urinary tract infections, rashes, pressure
sores, embarrassment, decreased sexual activity, depression and loss of
productive activity.

The Company intends to offer the physician a range of complementary
diagnostic and therapeutic products for the management of incontinence. The
Company recently filed a 510(k) Pre-Market Notification (a "510(k)
Notification") with the U.S. Food and Drug Administration (the "FDA") for its
In-Tac Surgical System to treat women with incontinence. The In-Tac System
incorporates the Company's proprietary bone anchors and anchor insertion device
to enable a minimally invasive transvaginal bladder neck suspension procedure.
Bladder neck suspensions are performed primarily to relieve severe stress
incontinence that is caused by descent (prolapse) of the urethra and bladder
neck. Approximately 120,000 bladder neck suspension surgeries were performed in
1993 in the U.S. using methods which typically require abdominal or vaginal
incisions and general anesthesia. In contrast, the In-Tac procedure requires no
abdominal or vaginal incisions and can be performed using local anesthesia,
which introduces less trauma to the patient, shortens the post-operative
recovery period, and reduces the need for hospitalization.

The Company is also developing a non-surgical, remote controlled,
intraurethral valved catheter, In-Sure, for the treatment of stress
incontinence. In-Sure includes a disposable silicone catheter that is intended
to be inserted by a healthcare provider into a woman's urethra and replaced
approximately once per month. The catheter incorporates a proprietary valve
system that is opened and closed with a remote control. In-Sure is intended to
offer a non-surgical alternative for the treatment of stress incontinence that
is easy and convenient for the patient to use. The Company is also developing a
variation of this product, the In-Flow, which incorporates an intraluminal pump
that can actively void a patient's bladder. In-Flow is intended to offer an
alternative to continuous Foley catheterization and intermittent self-
catheterization for patients with overflow incontinence associated with atonic
bladder. In-Flow is intended to avoid the inconvenience associated with
currently available treatment options and potentially reduce associated
complications, including recurrent urinary tract infections. The Company is
also developing male versions of these products, In-Sure-M and In-Flow-M. The
Company has completed pilot trials of In-Flow in Israel and Europe and intends
to initiate multicenter clinical trials in Europe and the U.S. in 1997.

The Company is also developing a number of complementary diagnostic and
therapeutic products to manage incontinence. In-Probe is a diagnostic system
being designed to identify quantitatively the specific cause of incontinence
and assist the physician in choosing an appropriate course of treatment. The
Company believes its In-Tele device, a small wireless disposable transmitter
inserted into the bladder, will enable more accurate diagnosis of urge
incontinence and may reduce the incidence of unnecessary surgeries. In-Bio is a
portable wireless biofeedback device which is being designed to increase the
effectiveness of pelvic floor training exercises by providing a convenient
method of feedback to patients outside of a physician's office. The Company is
also developing the In-Cuff, a permanent, implantable, remote-controlled,
artificial sphincter for the treatment of incontinence in men. Additionally,
Influence is seeking to apply its technology in the development of medical
devices outside the field of incontinence.

3
<PAGE>

THE OFFERING

Common Stock offered by the Shares
Company............................

Common Stock outstanding after the Shares
Offering(1)........................

Use of Proceeds..................... Research and product development;
expansion of sales, marketing and
manufacturing capabilities; repayment
of notes payable to a stockholder; and
working capital and other general
corporate purposes.

Proposed Nasdaq National Market INFL
symbol.............................

SUMMARY CONSOLIDATED FINANCIAL DATA

<TABLE>
<CAPTION>
NOVEMBER 9, 1994
(INCEPTION) YEAR ENDED SIX MONTHS ENDED JUNE
THROUGH DECEMBER 30,
DECEMBER 31, 31, -----------------------
1994 1995 1995 1996
---------------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
CONSOLIDATED STATEMENT
OF OPERATIONS DATA:
Research and development
costs.................. $ -- $ 771,326 $ 291,547 $ 775,419
Patent and licensing
costs................... 300,000 478,870 36,949 57,158
General and administra-
tive expenses.......... -- 459,271 190,435 635,584
--------- ----------- ---------- -----------
Total operating ex-
penses................ 300,000 1,709,467 518,931 1,468,161
Interest income......... -- 11,971 -- 3,530
--------- ----------- ---------- -----------
Net loss............... $(300,000) $(1,697,496) $ (518,931) $(1,464,631)
========= =========== ========== ===========
Pro forma net loss per
share (2).............. $ $
=========== ===========
Shares used in computing
pro forma net loss per
share (2)..............
<CAPTION>
JUNE 30, 1996
-----------------------
AS
ACTUAL ADJUSTED(3)
---------- -----------
<S> <C> <C> <C> <C>
CONSOLIDATED BALANCE
SHEET DATA:
Cash and cash equivalents............................ $ 826,368
Working capital...................................... 464,122
Total assets......................................... 1,494,391
Note payable to stockholder.......................... 1,000,000
Deficit accumulated during the development stage..... (3,462,127)
Stockholders' (deficit) equity....................... (128,785)
</TABLE>
- --------
(1) Based upon shares outstanding as of June 30, 1996. Excludes (i) 391,750
shares issuable upon exercise of options outstanding under the Company's
1995 Stock Option Plan (the "1995 Stock Option Plan") at an exercise price
of $5.00 per share, and (ii) 58,250 shares reserved for future issuances of
stock options.
(2) See Note 2 of Notes to Consolidated Financial Statements for information
concerning computation of the per share data.
(3) Adjusted to give effect to the sale of the Shares offered by the Company
hereby, assuming an initial public offering price of $ per Share (the
midpoint of the estimated initial public offering price range) and the
application of the net proceeds therefrom, including repayment of notes in
the aggregate amount of $2 million (including amounts advanced after June
30, 1996) payable to a stockholder, after deducting the estimated
underwriting discounts and commissions and estimated offering expenses
payable by the Company. See "Use of Proceeds."

----------------

Except as otherwise indicated, references to "Influence" or the "Company" are
to Influence, Inc. together with its wholly owned Israeli subsidiary, Influence
Medical Technologies, Ltd. ("IMT "). Except as set forth in the Financial
Statements or as otherwise indicated, all information in this Prospectus
assumes (i) the conversion of all outstanding shares of Series A Preferred
Stock into Common Stock which will become effective prior to the closing of
this Offering and (ii) no exercise of the Underwriters' over-allotment option.
See "Description of Capital Stock" and "Underwriting."

4
<PAGE>

RISK FACTORS

The Company is a development stage company and all its products are
currently under development. Therefore, this Prospectus necessarily contains
certain forward-looking statements, which reflect the Company's plans,
estimates and beliefs. The Company's actual results could differ materially
from those discussed in the forward-looking statements. Factors that could
cause or contribute to such difference include the risk factors set forth
below and elsewhere in this Prospectus.

DEVELOPMENT STAGE COMPANY

The Company is in a development stage and has not conducted any significant
commercial operations to date. Since inception, the Company has not derived
any revenues from product sales, and has accumulated a deficit during the
development stage of $3,462,127 mainly related to research and development
expenditures and expenses in connection with seeking regulatory approvals. The
Company expects its operating losses to increase over the foreseeable future
and there can be no assurance that the Company will be profitable in the
future. Potential investors should be aware of the problems, delays, expenses
and difficulties encountered by an enterprise in the Company's stage of
development, many of which may be beyond the Company's control. These include
the completion of development of the Company's products, progress and costs of
clinical trials, the timing and costs of various U.S. and foreign regulatory
filings, the timing and receipt of various U.S. and foreign governmental
approvals, the costs involved in preparing, filing, presenting, maintaining
and enforcing patent claims, the timing and extent to which the Company's
products gain market acceptance, the timing and costs of product introduction,
the costs of developing marketing and distribution capabilities, if regulatory
approvals are received, and the technological advances of competitors. See
"Use of Proceeds" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources."

RISK RELATING TO PRODUCTS UNDER DEVELOPMENT

All of the Company's products are still under development. Such products
will require further significant research, development, testing and regulatory
approvals prior to commercialization. The Company has only performed a limited
number of preclinical and clinical studies on certain of its products under
development. To date, the In-Tac Surgical System has been tested on 45
patients. In addition, to date only a very limited pilot trial has been
conducted with the In-Flow device. All of the other proposed products are
currently in the design and preclinical stage of development. Accordingly,
there can be no assurance that further pilot or clinical studies will not
demonstrate some deficiency in the design or efficacy of these products that
the Company is unable to overcome. No assurance can be given that any of the
Company's proposed products will prove to be safe and efficacious, receive
requisite regulatory approvals, demonstrate substantial therapeutic benefit,
be commercialized on a timely basis, experience no design or manufacturing
problems or be accepted by the marketplace. See "Business--Influence's
Incontinence Management System."

NO ASSURANCE OF REGULATORY APPROVALS; POTENTIAL DELAYS

The medical devices to be marketed and manufactured by the Company are
subject to extensive regulation by the FDA and, in some instances, by foreign
and state governments. Pursuant to the Federal Food, Drug, and Cosmetic Act,
as amended, and the regulations promulgated thereunder (the "FDC Act"), the
FDA regulates the clinical testing, manufacture, labeling, sale, distribution,
and promotion of medical devices. Before a new device can be introduced into
the market, the manufacturer must obtain market clearance through a 510(k)
Notification or market approval through the lengthier premarket approval
("PMA") application process. Noncompliance with applicable requirements,
including good manufacturing practices ("GMP"), can result in, among other
things, fines, injunctions, civil penalties, recall or seizure of products,
total or partial suspension of production, failure of the government to grant
premarket clearance or premarket approval for devices, withdrawal of marketing
approvals, and criminal prosecution.

5
<PAGE>

The regulatory approval process often takes a number of years and requires
the expenditure of substantial resources. There can be no assurance that
proposed products that may be developed by the Company will be able to satisfy
the current or future requirements and regulations of the FDA or comparable
foreign agencies. The Company has not received FDA clearance or approval for
any of its proposed products. There can be no assurance that the Company's
proposed products will not experience unanticipated delays in receiving FDA
clearance or approval or that such products will ever obtain the regulatory
clearance or approval required for marketing. In addition, there can be no
assurance that government regulations applicable to the Company's products or
the interpretation of those regulations will not change, and thereby prevent
the Company from marketing some or all of its products temporarily or
permanently. Any such unanticipated delays or lack of approval would have a
material adverse effect on the Company's business, financial condition and
results of operations.

The Company submitted a 510(k) Notification for the In-Tac Surgical System
for use in bladder neck suspension procedures with women in August 1995 that
was subsequently withdrawn due to FDA questions about the surgical procedure
associated with the insertion device. The Company subsequently modified the
surgical procedure to address the FDA questions and submitted a new 510(k)
Notification for the In-Tac Surgical System in June 1996. There can be no
assurance that the Company will obtain 510(k) clearance for the In-Tac
Surgical System in a timely manner, if at all, or that the FDA will not have
additional questions or require the submission of clinical data or a PMA for
the device. Failure on the part of the Company to obtain 510(k) clearance for
the In-Tac Surgical System could have a material adverse effect on the
Company's business, financial condition, and results of operations.

Based on conversations the Company has had with the FDA to date, the Company
believes it may be possible to obtain market clearance for the In-Flow device
through the submission of a 510(k) Notification with supporting clinical data.
However, there can be no assurance that the FDA will not require the
submission of a PMA for the In-Flow device. Moreover, there can be no
assurance that clinical data obtained for In-Flow will support the substantial
equivalence or safety and effectiveness of the device. Failure of the Company
to obtain FDA approval for clinical studies of In-Flow or the failure of any
clinical data obtained for the device to support the substantial equivalence
or safety and effectiveness of the device could result in a requirement for
submission of a PMA application and could have a material adverse effect on
the Company's business, financial condition, and results of operations.

The Company is currently evaluating its regulatory strategy for the In-Sure
device and intends to engage in further discussions with the FDA prior to
making a regulatory submission for the device. In January 1996 the Company
submitted a 510(k) Notification for In-Sure. In February 1996, the FDA
notified the Company that the 510(k) Notification was incomplete and that
animal and clinical data would be required for the device. There can be no
assurance that the FDA will not require the submission of a PMA application
for In-Sure. The Company believes that its other proposed products including
In-Tele, In-Probe and In-Bio may be cleared to market through the 510(k)
Notification process. However, there can be no assurance that the FDA will not
require substantial clinical data or the submission of a PMA for any of these
products. Moreover, even if these products can be cleared to market through
the 510(k) Notification process, there can be no assurance that, once 510(k)
Notifications are submitted, 510(k) clearance could be obtained in a timely
manner.

Regulatory approvals, if granted, may include significant limitations on the
intended uses for which a product may be marketed. FDA enforcement policy
strictly prohibits the promotion by the Company and any of its distributors of
approved medical devices for off-label uses. In addition, product approvals
may be withdrawn for failure to comply with regulatory standards or the
occurrence of unforeseen problems following initial marketing. Manufacturers
of medical devices are subject to strict federal regulations regarding
validation and the quality of manufacturing, including periodic FDA
inspections of the manufacturing facilities to determine compliance with GMP
regulations relating to testing, control and documentation. The Company's
existing and any future manufacturing facilities will be required to comply
with these and all other applicable FDA regulations, and with regulations
imposed by other governments. Ongoing compliance with GMP and other applicable
regulatory requirements is monitored through periodic inspections by state and
federal agencies,

6
<PAGE>

including the FDA, and by comparable agencies in other countries. Failure to
comply with applicable United States and international regulatory requirements
can result in failure of the relevant government agency to grant premarket
approval for devices, withdrawal of approval, total or partial suspension of
production, fines, injunctions, civil penalties, recall or seizure of
products, and criminal prosecution. Furthermore, changes in existing
regulations or adoption of new regulations or policies could prevent the
Company from obtaining, or affect the timing of, future regulatory approvals
or clearances.

International sales are subject to foreign government regulation, the
requirements of which vary substantially from country to country. The time
required to obtain approval by a foreign country may be longer or shorter than
that required for FDA approval, and the requirements may differ. The Company
also intends to seek ISO 9001 registration, an international manufacturing and
design quality standard, and to seek the "CE" mark for its proposed products.
The CE mark is recognized by countries that are members of the European Union
and the European Free Trade Association and, effective in 1998, will be
required to be affixed to all medical devices sold in the European Union. No
assurance can be given that the Company will obtain the CE mark for any of its
proposed products or satisfy ISO 9001 standards, or that any product which the
Company may develop or commercialize will obtain the CE mark, or will be able
to obtain any other required international regulatory clearance or approval on
a timely basis, or at all. See "Business--Government Regulation."

LIMITED MANUFACTURING EXPERIENCE

The Company has no experience in manufacturing commercial quantities of its
proposed products and currently has a facility capable only of limited
manufacturing of its proposed products for use in clinical trials and
production of certain proposed products in commercial quantities. In order to
successfully commercialize its proposed products, the Company will have to
increase the number of units it can produce, reduce per-unit manufacturing
costs and achieve the extremely high quality standards required for such
products. In order to manufacture in commercial quantities on the foregoing
basis, the Company will be required either to enhance significantly its
existing capabilities and equipment and recruit and retain a sufficient number
of skilled manufacturing personnel, or to enter into arrangements with third
parties to manufacture its proposed products. Prior to commencing
manufacturing of any products for commercial use in the United States, the
Company's facility will be required to comply with GMP requirements. There can
be no assurance that the Company will be able to establish manufacturing
capability, obtain GMP approval, make the transition to commercial
manufacturing successfully or manufacture its products cost-effectively, or at
all. Failure to do so could have a material adverse effect on the Company's
business, financial condition and results of operations. See "Business--
Manufacturing."

ABSENCE OF MARKETING AND SALES CAPABILITY

The Company has no experience marketing and selling products. Should the
Company receive FDA clearance to market any of its products in the United
States, the Company intends to establish a United States marketing and sales
organization. Establishing marketing and sales capability sufficient to
support sales in commercial quantities will require significant resources, and
there can be no assurance that the Company will be able to recruit and retain
qualified marketing personnel, direct sales personnel or contract sales
representatives or that future sales efforts of the Company will be
successful. Furthermore, due to the innovative nature of the Company's
proposed products and the limited market awareness of such products, the
Company anticipates that the marketing process may be lengthy, entailing the
education of physicians in the proper use and advantages of the Company's
proposed products. In addition, the Company intends to begin marketing its
proposed products outside the United States through distributors. To date, the
Company has not entered into any distributor agreements and there can be no
assurance that the Company will be able to engage qualified distributors in
these markets in a timely manner, if at all. While the Company is committed to
establishing an effective distribution channel for its products, there can be
no assurance that the Company will be successful in doing so. The failure to
establish and maintain an effective distribution channel for the Company's
products, or to retain qualified sales personnel to support commercial sales
of the Company's products, would have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Business--Marketing and Sales."

7
<PAGE>

UNCERTAIN MARKET ACCEPTANCE OF THE COMPANY'S PROPOSED PRODUCTS

The Company's future growth and profitability will depend, in large part, on
the acceptance by the medical community of the Company's proposed products,
assuming products currently under development receive regulatory approval.
This acceptance will be substantially dependent on educating the medical
community as to the distinctive characteristics, perceived benefits and
clinical efficacy of the proposed products. The Company believes that
recommendations by urologists, gynecologists and urogynecologists will be
essential for market acceptance of the Company's proposed products, and there
can be no assurance that any such recommendations will be obtained.
Furthermore, there can be no assurance that such products will be accepted by
patients. In addition, there can be no assurance that patients will not
develop adverse health effects while using the Company's products. Any such
adverse health effects, or the perception that such products could cause any
such adverse health effects, would have a material adverse effect on market
acceptance of such products. Finally, the Company has not yet determined
pricing of its proposed products, and the Company's pricing policies could
adversely impact market acceptance of such products as compared to competing
products and treatments. Any of the foregoing factors, or other factors, could
limit or detract from market acceptance of the proposed products. Insufficient
market acceptance of the proposed products would have an adverse effect on the
Company's business, financial condition and results of operations. See
"Business--Marketing and Sales."

DEPENDENCE ON PATENTS, LICENSES AND PROPRIETARY TECHNOLOGY

The Company is dependent upon its proprietary technology and seeks to
protect such technology through a combination of patents and confidentiality
agreements. As of June 30, 1996, the Company had 4 U.S. patent applications, 2
U.S. provisional patent applications, 5 PCT patent applications and 10 foreign
patent applications pending relating to the Company's technology underlying
its products. In addition, the Company has an exclusive world-wide license to
one issued U.S. patent, one pending U.S. patent application and 3 pending
foreign patent applications, which cover certain technology related to the In-
Tac System, including a method of transvaginal bladder neck suspension surgery
using an anchor and suture inserted into the pubic bone. There can be no
assurance that any patents will issue from such patent applications, that any
claims obtained will provide adequate protection for the Company's products,
or that such issued patents will be enforceable. In addition, methods of
treating humans are generally not patentable outside of the United States. No
assurance can be given that the technologies used by the Company do not
infringe upon the proprietary rights of others. The Company could incur
substantial costs in seeking enforcement of its patents against infringement
or unauthorized use by others or in defending itself against patent
infringement claims by others.

The medical device industry has been characterized by extensive litigation
regarding patents and other intellectual property rights, and companies in the
industry have employed intellectual property litigation to gain a competitive
advantage. There can be no assurance that the Company will not in the future
become subject to patent infringement claims and litigation, interference
proceedings commenced in the United States Patent and Trademark Office
("USPTO") by an examiner or by a third party to determine the priority of
inventions, or an opposition proceeding in a foreign country. The defense and
prosecution of intellectual property suits, interference proceedings, foreign
opposition proceedings and related legal and administrative proceedings are
both costly and time consuming. Litigation may be necessary to enforce or
defend patents issued to the Company, to protect the Company's trade secrets
or know-how or to determine the enforceability, scope and validity of the
proprietary rights of others. In addition, the laws of some foreign countries
do not protect the Company's proprietary rights to the same extent as do the
laws of the United States.

Any litigation, interference or opposition proceedings involving the Company
will result in substantial expense to the Company and significant diversion of
effort by the Company's technical and management personnel. An adverse
determination in litigation, interference or opposition proceedings to which
the Company may become a party could subject the Company to significant
liabilities to third parties or require the Company to seek licenses from
third parties. Although patent and intellectual property disputes in the
medical device area have often been settled through licensing or similar
arrangements, costs associated with such arrangements may be substantial and
could include ongoing royalties. Furthermore, there can be no assurance that
necessary licenses

8
<PAGE>

would be available to the Company on satisfactory terms, if at all. Adverse
determinations in a judicial or administrative proceeding or failure to obtain
necessary licenses could prevent the Company from manufacturing and selling
its products, which would have a material adverse effect on the Company's
business, financial condition and results of operations. The Company has been
notified by a third party that it has filed U.S. and PCT patent applications
directed to methods of treating urinary incontinence by bladder neck
suspension through the use of an anchor and suture inserted into bone. The
Company has conducted a review of the third party's relevant issued patents
and concluded that no patent infringement liability currently exists. In
addition, the Company believes, based on its review of available documents,
that it is unlikely that a valid patent will issue having claims sufficiently
broad to interfere with the Company's ability to sell its proposed In-Tac
surgical system. However, there can be no assurance that U.S. or other patents
will not issue in the future in the name of this particular third party or
another containing claims which would constrain the Company's ability to
manufacture and sell its products or prevent customers of the Company from
practicing the method of bladder neck suspension contemplated by use of the
Company's In-Tac Surgical System. The Company is also aware of a number of
U.S. patents of third parties related to intraurethral valved catheters for
the treatment of incontinence. The Company believes that Influence's proposed
devices will not infringe the claims of those patents. Although the Company
has not received any notice or threat of patent infringement related to such
patents, there can be no assurance that a suit for patent infringement will
not be filed by any of the patent owners or licensees in the future, that the
Company will prevail in any suit for patent infringement, or that the Company
will not be required to take a license under unfavorable terms or be enjoined
from manufacturing and selling its intraurethral valved catheter incontinence
devices.

In addition to patents, the Company relies on trade secrets and proprietary
know-how, which it seeks to protect, in part, through confidentiality and
proprietary information agreements. These agreements generally provide that
all confidential information developed or made known to the individual by the
Company during the course of the individual's relationship with the Company is
to be kept confidential and not disclosed to third parties, except in specific
circumstances. The agreements also generally provide that all inventions
conceived by the individual in the course of rendering services to the Company
shall be the exclusive property of the Company. There can be no assurance that
proprietary information or confidentiality agreements with employees,
consultants and others will not be breached, that the Company will have
adequate remedies for any breach, or that the Company's trade secrets will not
otherwise become known to or independently developed by competitors. See
"Business--Patents, Licenses and Proprietary Technology."

ABILITY TO MANAGE EXPANDING OPERATIONS

In order to achieve its business objectives, the Company must undergo
substantial changes in its operations to transition from a company primarily
involved in research and development to a company which develops,
manufactures, markets, and supports products and services for the marketplace.
These changes have placed, and are expected to continue to place, a
significant strain on the Company's limited administrative, operational and
financial resources. The Company only recently has begun the process of
developing the management and operational capabilities and financial and
accounting systems and controls necessary for this transition, should it
occur. In addition, the Company has only recently hired certain key members of
its management team. The ability of the Company to achieve its business
objectives will depend in large part on its ability to build or subcontract
efficient manufacturing operations, to develop its operational and sales and
marketing capabilities and its financial and management information systems,
to develop the management skills of its managers and supervisors, and to
train, motivate and manage both its existing employees and the additional
employees that will be required if the Company is to achieve its business
objectives. There can be no assurance that the Company will succeed in
developing all or any of these capabilities, and any failure to do so would
have a material adverse effect on the Company's business, financial condition
and results of operations. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Management."

9
<PAGE>

DEPENDENCE ON KEY PERSONNEL

The Company's future success will likely depend to a significant extent on
its executive officers and key employees, including Dr. Peter Bick, Dr.
Mordechay Beyar, Oren Globerman and Ze'ev Sohn, and other technical,
managerial and marketing personnel. The loss of the services of any of these
individuals could have a material adverse effect on the Company's business,
financial condition and results of operations. The Company does not have, and
is not contemplating securing, key man life insurance on any of its executive
officers or other key personnel. There can be no assurance that any of these
individuals or any other key employee will not voluntarily terminate his or
her employment with or service to the Company. The Company believes that its
future success will also depend significantly on its ability to attract,
motivate and retain additional highly skilled technical, managerial and
marketing personnel. Competition for qualified personnel is intense,
especially in Israel, where the Company's main research and development
facilities are located, and there can be no assurance that the Company will be
successful in attracting, assimilating and retaining the personnel required to
grow and operate profitably. See "Business--Employees," "Management--
Directors, Executive Officers and Key Employees" and "Management--Employment
Agreements."

INTENSE COMPETITION AND RISKS ASSOCIATED WITH RAPID TECHNOLOGICAL CHANGE

The Company is engaged in rapidly evolving and highly competitive fields.
Competition from medical device manufacturers and pharmaceutical companies and
other competitors is intense and expected to increase. Many of these companies
have substantially greater capital resources, research and development staffs,
facilities, and experience in obtaining regulatory approvals as well as in the
manufacturing, marketing and distribution of products than the Company.
Academic institutions, hospitals, governmental agencies and other public and
private research organizations also conduct research and seek patent
protection and may develop competing products or technologies on their own or
through joint ventures. In addition, recently developed technologies or
technologies that may be developed in the future are, or may be, the basis for
competitive products. The Company's products could be rendered obsolete or
uneconomical by technological advances by one or more of the Company's
competitors or by other therapies such as drugs to treat conditions addressed
by the Company's products. The Company's business, financial condition and
results of operations will depend upon whether the Company can compete
effectively with other developers of such medical devices and therapies.

In addition, some of the Company's competitors have greater experience than
the Company in conducting preclinical and clinical trials and obtaining FDA
and other regulatory approvals. Accordingly, the Company's competitors may
succeed in obtaining FDA or other regulatory approvals for products more
rapidly than the Company. Companies that complete clinical trials, obtain
required regulatory agency approvals and commence commercial sale of their
products before their competitors may achieve a significant competitive
advantage, including certain patent and FDA marketing exclusivity rights that
would delay the Company's ability to market certain products. There can be no
assurance that products resulting from the Company's research and development
efforts will be able to compete successfully with competitors' existing
products or products under development or that they will obtain regulatory
approval in the United States or elsewhere. See "Business--Competition."

UNCERTAINTY RELATING TO THIRD-PARTY REIMBURSEMENT

In the United States, hospitals, physicians and other healthcare providers
that purchase medical devices generally rely on third-party payors, such as
private health insurance plans, health maintenance organizations, preferred
provider organizations, as well as government-sponsored programs, such as
Medicare and Medicaid, to reimburse all or part of the cost associated with
the treatment of patients. Medicare and many other third-party payors do not
reimburse for procedures deemed "experimental" or "investigational." There is
usually no precise date when a procedure ceases to be experimental or
investigational, but devices in clinical investigation are usually deemed to
be experimental or investigational. The failure to cover early use of a
procedure deters usage, delaying acceptance even longer. Furthermore, there
can be no assurance, even if the Company's products are cleared or approved by
the FDA for new clinical applications, that any reimbursement will be
available for

10
<PAGE>

such procedures. A key component in the reimbursement decision by the United
States Health Care Financing Administration, which administers Medicare, and
most private insurers is the assignment of a Current Procedural Terminology
("CPT") code which is used in the submission of claims to insurers for
reimbursement of medical services. CPT codes are assigned, maintained and
revised by the CPT editorial board administered by the American Medical
Association. The Company intends to petition the CPT editorial board for codes
for its proposed products. There can be no assurance that the Company will
succeed in securing recognition by the CPT editorial board of specific codes
for its proposed products. Failure to secure recognition by the CPT editorial
board could have a material adverse effect on the Company's business,
financial condition and results of operations. The Company currently has no
experience in obtaining reimbursement for its products in the United States or
other countries. In addition, third-party payors are routinely limiting
reimbursement coverage for medical devices and in many instances are exerting
significant pressure on medical suppliers to lower their prices. The Company
could also be adversely affected by changes in reimbursement policies of
government or private health care payors, particularly to the extent that any
such changes affect reimbursement for therapeutic or diagnostic procedures in
which the Company's products are used. Failure by physicians, hospitals and
other users of the Company's products to obtain sufficient reimbursement from
healthcare payors for procedures in which the Company's products are used, or
adverse changes in government and private third-party payors' policies toward
reimbursement for such procedures, could have a material adverse effect on the
Company's business, financial condition and results of operations.

Market acceptance of the Company's products in international markets may be
dependent in part upon the availability of reimbursement within prevailing
healthcare payment systems. Reimbursement and healthcare payment systems in
international markets vary significantly by country, and include both
government-sponsored and private healthcare insurance. Although the Company
will seek international reimbursement approvals, obtaining such approvals can
require 12 to 18 months or longer and there can be no assurance that any such
approvals will be obtained in a timely manner, if at all. Failure to receive
additional international reimbursement approvals could have a material adverse
effect on market acceptance of the Company's products in the international
markets in which the Company is seeking approvals and could have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Business--Third Party Reimbursement."

PRODUCT LIABILITY EXPOSURE

Medical product companies face an inherent business risk of financial
exposure to product liability claims in the event that the use of their
products results in personal injury. The Company's products are and will be
designed with numerous safety features, but it is possible that a patient's
health could be adversely affected by use of one of the Company's products or
that a death could occur. Further, in the event that any of the Company's
products prove to be defective, the Company may be required to recall and
redesign such products. Market clearance or approval of the Company's products
by the FDA will not shield the Company from potential product liability
exposure. Although the Company has not experienced any material losses due to
product liability claims to date, there can be no assurance that it will not
experience such losses in the future. The Company maintains liability
insurance. However, there can be no assurance that such coverage will continue
to be available on terms acceptable to the Company or that such coverage will
be adequate for liabilities actually incurred, and the Company anticipates
that it will review such coverage from time to time. In the event the Company
is found liable for damages in excess of the limits of its insurance coverage,
or if any claim or product recall results in significant adverse publicity
against the Company, the Company's business, financial condition and results
of operations could be materially and adversely affected. See "Business--
Product Liability and Warranties."

UNCERTAINTY OF FUTURE CAPITAL REQUIREMENTS

The Company's capital requirements will depend on numerous factors. These
include the completion of development of the Company's products, progress and
costs of clinical trials, the timing and costs of various U.S. and foreign
regulatory filings, the timing and receipt of various U.S. and foreign
governmental approvals, the costs involved in preparing, filing, presenting,
maintaining and enforcing patent claims, the timing and extent

11
<PAGE>

to which the Company's products gain market acceptance, the timing and costs
of product introduction, the costs of developing marketing and distribution
capabilities, if regulatory approvals are received, and the technological
advances of competitors. The timing and amount of such capital requirements
cannot accurately be predicted. Consequently, although the Company believes
the proceeds from this Offering will provide adequate funding for its capital
requirements through 1998, there can be no assurance that the Company will not
require additional funding or that such additional funding, if needed, will be
available on terms attractive to the Company, or at all. Any additional equity
financing may be dilutive to stockholders, and debt financing, if available,
may involve restrictive covenants. See "Use of Proceeds" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Liquidity and Capital Resources."

CONCENTRATION OF OWNERSHIP

Upon completion of the Offering, and assuming no exercise of the
Underwriters' over-allotment options, the officers, directors, and principal
stockholders of the Company, as a group, will beneficially own approximately
% of the outstanding Shares. As a result, until there is a substantial
decrease in the percentage of the outstanding Shares held by such principal
shareholders, such principal shareholders could act together to elect all of
the members of the Board of Directors, to approve all matters requiring
shareholder approval and to significantly influence the affairs of the
Company. See "Management" and "Principal Shareholders."

POTENTIAL CONFLICTS OF INTEREST

Certain key employees of the Company also are affiliated with other
companies. Oren Globerman, a founder and Vice Chairman of Influence and a
General Manager of IMT, Influence's Israeli subsidiary, is also the General
Manager of InStent Israel, Ltd. ("InStent"), a subsidiary of Medtronic, Inc.,
a medical device manufacturer. Dr. Mordechay Beyar, a founder and Vice
Chairman of Influence and a General Manager of IMT, Influence's Israeli
subsidiary, is a consultant to InStent. In addition, Mr. Globerman and Dr.
Beyar also work for another developer of medical technology which they control
and a pharmaceutical development company in which they are shareholders,
neither of which companies are involved in incontinence or related fields. The
pursuit of these other business interests could distract them from pursuing
opportunities on behalf of the Company and could lead to potential conflicts
of interest related to corporate opportunities. See "Certain Transactions."

POSSIBLE ADVERSE IMPACT ON MARKET PRICE OF SHARES ELIGIBLE FOR FUTURE SALE

Sales of Common Stock (including shares issued upon the exercise of
outstanding options) in the public market after this Offering could materially
and adversely affect the market price of the Common Stock. Such sales also
might make it more difficult for the Company to sell equity securities or
equity-related securities in the future at a time and price that the Company
deems appropriate. Upon the completion of this Offering, the Company will have
shares of Common Stock outstanding, of which the shares offered
hereby will be freely tradeable (unless held by affiliates of the Company)
without restriction. The remaining shares will be restricted securities
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act"). The Company's directors, executive officers and certain of its
shareholders, who in the aggregate hold of the shares of Common Stock of
the Company outstanding immediately prior to the completion of this Offering,
have entered into lock-up agreements under which they have agreed not to sell,
directly or indirectly, any shares owned by them for a period of 180 days
after the date of this Prospectus without the prior written consent of
Montgomery Securities. Montgomery Securities may, in its sole discretion and
at any time without notice, release all or any portion of the shares subject
to such lock-up agreements. Upon expiration of the 180 day lock-up agreements,
approximately additional shares of Common Stock will become eligible for
public resale, subject in some cases to volume limitations pursuant to Rule
144 under the Securities Act. The remaining approximately shares held by
existing stockholders will become eligible for public resale at various times
over a period of less than two years following the completion of this
offering, subject in some cases to vesting provisions and volume limitations.
The Securities and Exchange Commission has proposed an amendment to Rule 144
which would reduce the holding period required for shares subject to
Rule 144 to become eligible for sale in the public market. If the proposed
amendment becomes effective, holding periods referred to in this paragraph
will be reduced, which will have a material effect on the times when shares of
Common Stock become eligible for resale. See "Shares Eligible for Future
Sale."

12
<PAGE>

ABSENCE OF PRIOR MARKET FOR SHARES; POSSIBLE VOLATILITY OF STOCK PRICE

Prior to the Offering, there has been no public trading market for the
Shares, and there can be no assurance that an active trading market will
develop or be sustained after the Offering. The stock market has from time to
time experienced extreme price and volume fluctuations which often have been
unrelated to the operating performance of particular companies. Moreover,
especially with the current uncertainty about health care policy,
reimbursement and coverage in the United States, there has recently been
significant volatility in the market price and trading volume of securities of
medical device and other health care companies unrelated to the performance of
such companies. Announcements of technological or medical innovations or new
commercial products by the Company or its competitors, developments or
disputes concerning intellectual property rights, changes in governmental
regulation or the status of the Company's regulatory approvals or
applications, changes in earnings, changes in health care policies and
practices, economic and other external factors, political, economic and other
developments in the State of Israel, as well as period-to-period fluctuations
in financial results of the Company and comments by financial analysts may
have a significant impact on the market price and marketability of the Shares.
Fluctuations or decreases in the trading price of the Shares may adversely
affect the liquidity of the trading market for the Shares and, in the event
that the Company seeks to raise capital through future equity financing, the
Company's ability to raise such equity capital. The initial public offering
price of the Shares in the Offering will be determined by negotiations among
the Company and the Representatives (as defined herein) of the Underwriters
based on several factors and may not be indicative of prices that will prevail
in the open market. See "Underwriting."

ABSENCE OF DIVIDENDS

Influence has not paid any dividends on its Shares and does not presently
anticipate paying any dividends on such Shares in the foreseeable future.
Since the Company's Israeli subsidiary will generate most of the operating
revenues of the Company, Influence will be dependent upon the dividend
distributions it receives from its Israeli subsidiary as a source for any
payment of cash dividends to Influence shareholders. The Company's Israeli
subsidiary may pay cash dividends in any fiscal year only out of "profits," as
determined for Israeli statutory purposes. As a result, the ability of
Influence to pay dividends to shareholders may be limited. In addition, the
Company's Israeli subsidiary has applied for certain benefits under the laws
relating to "Approved Enterprises," and if such approval is granted, the
payment of dividends by the Company's Israeli subsidiary during the first two
years of such benefits may subject it to certain Israeli taxes to which it
would not otherwise be subject, which may further limit the Company's ability
to pay dividends. See "Dividend Policy."

IMMEDIATE AND SUBSTANTIAL DILUTION

A purchaser of Shares in the Offering will experience immediate and
substantial dilution of approximately $ per Share. The net tangible book
value of the Shares outstanding subsequent to the Offering will be
substantially less than the per share public offering price of the Shares.
Such investors will suffer additional dilution upon exercise of outstanding
options. See "Dilution."

PRINCIPAL SUBSIDIARY'S LOCATION IN ISRAEL

The Company's product development and proposed production facilities are
located in the State of Israel, and the Company is directly affected by the
political, economic and military conditions to which that country is subject.
Accordingly, any major hostilities involving Israel or the interruption or
curtailment of trade between Israel and its present trading partners could
have a material adverse effect on the Company's business, financial condition
and results of operations.

Since the establishment of the State of Israel in 1948, a state of hostility
has existed, varying in degree and intensity, between Israel and the Arab
countries. In addition, Israel and companies doing business with Israel have
been the subject of an economic boycott initiated by the Arab countries since
Israel's establishment. Although Israel has entered into certain agreements
with Egypt, Jordan and the Palestinian National Authority, and certain aspects
of the Arab boycott have been relaxed, no prediction can be made as to whether
a full resolution of these problems will be achieved or as to the nature of
any such resolution.

13
<PAGE>

Many of the Company's officers and employees are currently obligated to
perform annual reserve duty in the Israel Defense Forces and are subject to
being called for active military duty at any time. The Company has operated
effectively under these requirements to date. No prediction can be made as to
the effect on the Company of any expansion of these obligations.

The Company has applied for tax benefits from, and expects to participate in
programs sponsored by, the Government of Israel, including certain government
grants, tax benefits and programs. If the Company does not in fact receive
such benefits, or if received, such benefits are terminated or reduced
substantially, there could be a material adverse effect on the Company's
business, financial condition and results of operation. See "Israeli Taxation
and Investment Programs."

SERVICE OF PROCESS AND ENFORCEMENT OF JUDGMENTS

Influence's principal subsidiary is incorporated in Israel, certain of its
officers and directors are non-residents of the United States, and a
substantial portion of the assets of such persons and the Company are located
outside the United States. It may be difficult for investors to (i) effect
service of process against certain of the Company's officers and directors who
reside outside the United States, or (ii) enforce, in United States courts,
judgments against such officers and directors who may be deemed to be
underwriters, which are obtained in such courts predicated upon the civil
liability provisions of the United States federal securities laws. In
addition, the Company understands that there is doubt as to whether the courts
of Israel would enforce, in original actions brought in such courts, civil
liabilities against the Company or such persons predicated solely upon the
federal securities laws of the United States. The Company understands that
Israeli courts may enforce a foreign (including United States) final executory
judgment for liquidated damages in a civil suit, obtained after due trial
before a court of competent jurisdiction (as determined under Israeli law),
provided that (i) the courts of such jurisdiction would enforce similar
Israeli judgments, (ii) due service of process with respect to the Israeli
enforcement action has been effected upon the party against whom the foreign
judgment is to be enforced, (iii) such judgment or its enforceability is not
contrary to the law, public policy, security or sovereignty of the State of
Israel, (iv) such judgment was not obtained by fraud and does not conflict
with any other such judgment in the same matter between the same parties, and
(v) an action between the same parties with regard to the same subject matter
was not pending in any court or tribunal in Israel at the time the original
lawsuit was instituted in the foreign court. Foreign judgments enforced by
Israeli courts will generally be payable in Israeli currency and a specific
permit of the Israeli Controller of Foreign Exchange will be required to
convert such currency into dollars and to transfer out of Israel proceeds of a
foreign judgment enforced in Israel. Judgment creditors bear the risk of
unfavorable exchange rates.

14
<PAGE>

THE COMPANY

Influence, Inc. was incorporated in Delaware on November 9, 1994, and IMT,
its Israeli subsidiary, was formed on January 1, 1995. The Company's corporate
headquarters are located at 601 Montgomery Street, Suite 845, San Francisco,
California 94111; the telephone number is (415) 421-5600. The Company's
research and development facilities, Israeli headquarters and manufacturing
facilities are located in Ramat Gan (a suburb of Tel Aviv), Israel.

USE OF PROCEEDS

The net proceeds to be received by the Company from the sale of the Shares
offered hereby are estimated to be approximately $ (approximately $ if
the Underwriters' over-allotment option is exercised in full) assuming an
initial public offering price of $ per Share, and after deducting the
underwriting discounts, commissions and estimated offering expenses payable by
the Company.

The Company intends to use such net proceeds for additional research and
product development, conducting clinical trials, obtaining regulatory
approvals, expanding sales, marketing and manufacturing capabilities,
repayment of notes in the aggregate amount of $2 million payable to a
stockholder and for working capital and general corporate purposes. The
Company may also use a portion of such net proceeds to finance potential
acquisitions of businesses, products or technology. As of the date of this
Prospectus, the Company has no current plans or commitments regarding any such
acquisitions, and no acquisitions are currently under negotiation. Pending use
of the proceeds from the Offering as described above, the Company intends to
invest the proceeds primarily in United States government obligations or other
investment-grade, interest-bearing investments.

The Company believes that the net proceeds of this Offering, together with
its existing capital resources and interest income will be sufficient to fund
its operating expenses and capital requirements as currently planned through
the end of 1998. However, there can be no assurance that such funds will be
sufficient to fund its operating expenses and capital requirements during such
period. The Company's actual cash requirements may vary materially from those
now planned and will depend upon numerous factors. These include the
completion of development of the Company's products, progress and costs of
clinical trials, the timing and costs of various US and foreign regulatory
filings, the timing and receipt of various US and foreign governmental
approvals, the costs involved in preparing, filing, presenting, maintaining
and enforcing patent claims, the timing and extent to which the Company's
products gain market acceptance, the timing and costs of product introduction,
the costs of developing marketing and distribution capabilities, if regulatory
approvals are received, and the technological advances of competitors. See
"Risk Factors--Uncertainty of Future Capital Requirements."

DIVIDEND POLICY

Influence has never paid dividends on its Shares and does not presently
intend to pay dividends in the foreseeable future. Influence intends to retain
its earnings to finance the development of its business. Any future dividend
policy will be determined by Influence's Board of Directors (the "Board")
based upon conditions then existing, including the Company's earnings,
financial condition, tax position and capital requirements as well as such
economic and other conditions as the Board may deem relevant. Since the
Company's Israeli subsidiary will generate most of the operating revenues of
the Company, Influence will be dependent upon the dividend distributions it
receives from its Israeli subsidiary as a source for any payment of cash
dividends to Influence shareholders. The Company's Israeli subsidiary may pay
cash dividends in any fiscal year only out of "profits," as determined for
Israeli statutory purposes. As a result, the ability of Influence to pay
dividends to its shareholders may be limited. In addition, the Company's
Israeli subsidiary has applied for certain benefits under the laws relating to
"Approved Enterprises," and if such approval is granted, the payment of
dividends by the Company's Israeli subsidiary during the first two years of
such benefits may subject it to certain Israeli taxes to which it would not
otherwise be subject, which may further limit the Company's ability to pay
dividends. See "Israeli Taxation and Investment Programs."

15
<PAGE>

CAPITALIZATION

The following table sets forth the capitalization of the Company as of June
30, 1996, and as adjusted to give effect to the receipt of the estimated net
proceeds from the sale of Shares offered by the Company hereby at an
assumed initial public offering price of $ per share and the repayment of
notes in the aggregate amount of $2 million (including amounts advanced after
June 30, 1996) payable to a stockholder. This table should be read in
conjunction with the more detailed financial data and notes thereto included
elsewhere in this Prospectus.

<TABLE>
<CAPTION>
JUNE 30, 1996
-----------------------
ACTUAL AS ADJUSTED
---------- -----------
<S> <C> <C>
Note payable to stockholder............................ $1,000,000 $ --
---------- ----
Stockholders' (deficit) equity(1):
Series A Preferred Stock, par value $0.01, 750,000
shares authorized 713,000 shares issued and outstand-
ing actual; 850,000 shares authorized, none issued
and outstanding, as adjusted......................... 7,130
Common Stock, par value $0.001, 4,800,000 shares au-
thorized 3,934,750 shares issued and outstanding ac-
tual; 30,000,000 shares authorized, issued
and outstanding, as adjusted......................... 3,935
Additional paid-in capital............................ 3,593,510
Unearned compensation................................. (271,233)
Deficit accumulated during the development stage...... (3,462,127)
---------- ----
Total stockholders' (deficit) equity................. (128,785)
---------- ----
Total capitalization................................. $ 871,215 $
========== ====
</TABLE>
- --------
(1) Based upon shares outstanding as of June 30, 1996. Excludes (i) 391,750
shares issuable upon exercise of options outstanding under the 1995 Stock
Option Plan at an exercise price of $5.00 per share, and (ii) 58,250
shares reserved for future issuances of stock options.

16
<PAGE>

DILUTION

Dilution represents the difference between the offering price per Share paid
by the purchasers in this Offering and the net tangible book value per Share
immediately after completion of this Offering. The consolidated net tangible
book value deficit of the Company as of June 30, 1996 was $128,785 or
approximately $0.03 per Share. "Consolidated net tangible book value deficit
per Share" represents the amount of (i) total consolidated tangible assets,
less total consolidated liabilities, divided by (ii) the number of Shares
outstanding on such date, including the conversion of all Preferred Shares.
After giving effect to the sale of shares of Common Stock offered hereby
at an assumed initial public offering price of per share, resulting in net
proceeds to the Company at approximately $ million, the pro forma
consolidated net tangible book value of the Company as of June 30, 1996 would
have been $ or approximately $ per Share. This represents an immediate
increase in consolidated net tangible book value deficit of approximately $
per Share to existing shareholders and an immediate dilution of approximately
$ per Share to new investors. The following table illustrates this per Share
dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price............................ $
Consolidated net tangible book value deficit before the Offer-
ing............................................................ $(0.03)
Change in consolidated net tangible book value deficit attribut-
able to purchase of Shares by new investors....................
------
Consolidated net tangible book value after the Offering.......... $
-----
Dilution per share to new investors.............................. $
=====
</TABLE>

The following table summarizes on a pro forma basis as of June 30, 1996, the
number of Shares purchased from the Company, the total cash consideration paid
and the average price per share paid by existing shareholders and to be paid
by purchasers of shares offered hereby at an assumed initial offering price of
$ before deducting the underwriting discounts and commissions and
estimated offering expenses payable by the Company.

<TABLE>
<CAPTION>
TOTAL
SHARES PURCHASED CONSIDERATION AVERAGE
----------------- ------------------ PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
--------- ------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing shareholders............ 4,647,750 $2,969,055 $0.64
New investors.................... $ $
--------- --- ---------- ---
Total............................ 100% $ 100% $
========= === ========== ===
</TABLE>

The foregoing (i) assumes the conversion of all shares of Series A Preferred
Stock into Common Stock prior to closing of this Offering, (ii) assumes no
exercise of the Underwriters' over-allotment option and, (iii) assumes no
exercise of any outstanding stock options. At June 30, 1996, there were
outstanding options to purchase an aggregate of 391,750 shares of Common Stock
at an exercise price of $5.00 per share. To the extent such outstanding
options are exercised, there will be further dilution to new investors. See
"Management--Stock Option Plans," and Notes 6 and 9 of Notes to Consolidated
Financial Statements.

17
<PAGE>

SELECTED CONSOLIDATED FINANCIAL DATA

The following selected financial data as of December 31, 1994 and 1995 and
for the period from November 9, 1994 (inception) through December 31, 1994 and
for the year ended December 31, 1995 have been derived from the financial
statements of the Company as set forth elsewhere in this Prospectus that have
been audited by Coopers & Lybrand, L.L.P., independent accountants. The
selected financial data as of June 30, 1996 and for the six months ended June
30, 1995 and 1996 have been derived from unaudited financial statements of the
Company as set forth elsewhere in this Prospectus, which, in management's
opinion, reflects all adjustments (consisting only of normal recurring
adjustments) necessary for a proper statement of the results for such periods.
The financial data set forth below should be read in conjunction with the
financial statements, related notes and other financial information contained
in this Prospectus.

<TABLE>
<CAPTION>
NOVEMBER 9,
1994
(INCEPTION) YEAR ENDED SIX MONTHS ENDED JUNE
THROUGH DECEMBER 30,
DECEMBER 31, 31, ----------------------
1994 1995 1995 1996
------------ ----------- --------- -----------
<S> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OP-
ERATIONS DATA:
Research and development
costs....................... $ -- $ 771,326 $ 291,547 $ 775,419
Patent and licensing costs... 300,000 478,870 36,949 57,158
General and administrative
expenses.................... -- 459,271 190,435 635,584
--------- ----------- --------- -----------
Total operating expenses.... 300,000 1,709,467 518,931 1,468,161
Interest income.............. -- 11,971 -- 3,530
--------- ----------- --------- -----------
Net loss..................... $(300,000) $(1,697,496) $(518,931) $(1,464,631)
========= =========== ========= ===========
Pro forma net loss per share
(1)......................... $ $
=========== ===========
Shares used in computing pro
forma net loss per
share (1)...................
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- JUNE 30,
1994 1995 1996
-------- ---------- ----------
<S> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents.................... $ -- $1,375,262 $ 826,368
Working capital.............................. (296,470) 1,011,833 464,122
Total assets................................. -- 1,626,902 1,494,391
Note payable to stockholder.................. -- -- 1,000,000
Deficit accumulated during the development
stage....................................... (300,000) (1,997,496) (3,462,127)
Stockholders' (deficit) equity............... (296,470) 1,147,079 (128,785)
</TABLE>
- --------
(1) See Note 2 of Notes to Consolidated Financial Statements for information
concerning computation of the per share data.

18
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The Company is a development stage company and all its products are
currently under development. Therefore, the following discussion necessarily
contains certain forward-looking statements which reflect the Company's plans,
estimates and beliefs. The Company's actual results could differ materially
from those discussed in the forward-looking statements. Factors that could
cause or contribute to such differences include those discussed below and
elsewhere in this Prospectus, particularly in "Risk Factors." The following
discussion and analysis of the Company's financial condition and results of
operations should be read in conjunction with the Consolidated Financial
Statements and the Notes thereto which appear elsewhere in this Prospectus.

OVERVIEW

The Company is engaged in the design, development and commercialization of a
disease management system of products for the diagnosis and treatment of
urinary incontinence in both men and women. The Company's products under
development include diagnostic tools, remote controlled intraurethral valved
catheter systems and proprietary surgical tools and equipment for performing
minimally invasive surgery to restore continence.

Influence was incorporated on November 9, 1994, and IMT, its wholly owned
Israeli subsidiary, was formed shortly thereafter. The Company's principal
development activities have been carried out at IMT. For several years prior
to the organization of the Company, the Company's core energy transfer
technology and components of the In-Tac Surgical System were under development
by Dr. Beyar, Ze'ev Sohn and Oren Globerman, three of the Company's principal
founders. Following the organization of the Company, Dr. Beyar and Mr.
Globerman, and their research and development company, NMB Medical
Applications Ltd. ("NMB"), transferred to the Company all rights to
commercially exploit these technologies. The Company paid NMB approximately
$326,000 in 1994 and 1995 for the technologies acquired by the Company from
NMB. From inception through June 30, 1996, IMT paid Dr. Beyar, Oren Globerman
and Ze'ev Sohn, for their continued development efforts in the field of the
Company's products on behalf of the Company. Beginning July 1, 1996, Dr. Beyar
and Mr. Globerman will provide their services directly to IMT, and NMB will no
longer receive fees for these services.

Since inception, the Company has not derived any revenues from product
sales, and has accumulated a deficit of $3,462,127 mainly related to research
and development expenditures and expenses related to clinical trials and
seeking regulatory approvals. Influence expects to continue to incur
significant and increasing operating losses through at least 1998 as the
Company continues to complete product development, conduct clinical trials and
seek regulatory approvals for its incontinence disease management products. In
addition, the Company anticipates increasing operating expenses for marketing
and sales efforts in contemplation of product introductions and market
development and administrative activities to support the growth of the
Company.

All of the Company's products are still under development. The Company has
only performed a limited number of pre-clinical and clinical studies on
certain of its products under development. The Company's products will require
significant research, development, testing and regulatory approvals prior to
commercialization. There can be no assurance that any of the Company's
proposed products will prove to be safe or efficacious, receive requisite
regulatory approvals, demonstrate substantial therapeutic benefit, be
commercialized on a timely basis or be accepted by the marketplace.

RESULTS OF OPERATIONS

Six Months Ended June 30, 1996 and 1995

Research and Development Costs. Research and development costs increased to
$775,419 for the six months ended June 30, 1996 from $291,547 for the
corresponding period of the prior year. This increase was primarily due to
increased product development activities in 1996, including additional
personnel and pre-clinical and clinical trials.

19
<PAGE>

Patent and Licensing Costs. Patent and licensing costs increased to $57,158
for the six months ended June 30, 1996 from $36,949 for the corresponding
period of the prior year. This increase was primarily due to increased costs
related to patent filings and prosecution in 1996.

General and Administrative Expenses. General and administrative expenses
increased to $635,584 for the six months ended June 30, 1996 from $190,435 for
the corresponding period of the prior year. This increase was primarily due to
relocation of the Company's Israeli facility, establishment of U.S. corporate
headquarters and additional personnel costs.

Year Ended December 31, 1995 and Inception (November 9, 1994) through December
31, 1994

The Company did not conduct any operations from its inception until January
1, 1995. In connection with the founding of Influence, certain of the
Company's core technology was transferred to the Company in 1994 from NMB, in
exchange for $300,000 to reimburse NMB for development expenditures prior to
that time.

LIQUIDITY AND CAPITAL RESOURCES

The Company has financed its operations to date principally through a
private placement of the Company's Preferred Stock and through the issuance of
shareholder promissory notes. During 1995, the Company raised approximately
$3.6 million through the issuance of Series A Preferred Stock. In June and
August 1996 a shareholder of the Company loaned the Company an aggregate of
$2.0 million, payable within two years of issuance with interest accruing at a
federal short term rate. The Company intends to use the net proceeds of this
Offering to repay such debt plus interest thereon. Cash used to fund
operations, since inception was approximately $2.7 million and the Company's
capital expenditures through June 30, 1996 have aggregated approximately
$429,000. At June 30, 1996, the Company had cash and cash equivalents of
$826,368. The Company has received assurances from certain stockholders that
they will provide the financing necessary to enable the Company to continue to
operate through the earlier of December 31, 1997 or until alternative
financing, including the proceeds of this Offering, can be obtained.

The Company expects to incur significant additional operating losses over
each of the next several years and expects cumulative losses to increase
significantly as the Company continues to expand its research and development,
clinical trials and marketing efforts. The Company anticipates that the
proceeds of the Offering and interest thereon, together with existing cash and
cash equivalents, will be sufficient to fund its operations, including
increased working capital expenditures, through at least 1998.

Future liquidity and capital requirements of the Company will depend upon a
number of factors. These include the completion of development of the
Company's products, progress and costs of clinical trials, the timing and
costs of various U.S. and foreign regulatory filings, the timing and receipt
of various U.S. and foreign governmental approvals, the costs involved in
preparing, filing, presenting, maintaining and enforcing patent claims, the
timing and extent to which the Company's products gain market acceptance, the
timing and costs of product introduction, the costs of developing marketing
and distribution capabilities, if regulatory approvals are received, and the
technological advances of competitors. The Company may be required to seek
additional funds through debt or equity financing, arrangements with corporate
partners or from other sources. Issuance of additional equity securities could
result in substantial dilution in ownership and control to the then existing
shareholders. There can be no assurance that any such funds will be available
on terms acceptable to the Company, or at all.

EFFECTIVE CORPORATE TAX RATE

The Company anticipates that most of the Company's future revenues and
profits, if any, would be derived through IMT, which holds the rights to
commercially exploit the Company's core technologies. As of December 31, 1995,
the Company's Israeli subsidiary, IMT, had net operating loss carry forwards
for Israeli tax purposes of approximately $1.2 million, which may be carried
forward indefinitely. See Note 7 of Notes to Consolidated

20
<PAGE>

Financial Statements appearing elsewhere in this Prospectus. IMT has applied
for "Approved Enterprise" status under the Law for Encouragement of Capital
Investments, 1959 for its Ramat Gan, Israel, facility. If the facility is
designated as an Approved Enterprise, it would be eligible for certain tax
benefits. Undistributed income derived from this Approved Enterprise would be
tax exempt for two years from the first year it generated income and is
subject to a reduced tax (dependent on percentage of foreign shareholder
ownership) for an additional period of up to eight years. If the Company's
Israeli plant is designated as an Approved Enterprise, the Company anticipates
that a significant portion of the Company's taxable income, if any, over the
next several years will be tax exempt or subject to reduced tax rates in
Israel. See "Israeli Taxation and Investment Programs--Law for the
Encouragement of Capital Investments, 1959." The Company expects, however,
that it will pay taxes in the U.S. based on profits from sales of products in
the U.S. and intercompany licensing fees paid by IMT to Influence.
Accordingly, Influence, will be subject to U.S. corporate income taxes on a
portion of its income. See "United States Federal Income Taxation."

21
<PAGE>

BUSINESS

GENERAL

The Company intends to offer the physician a range of complementary
diagnostic and therapeutic products for the management of incontinence. The
Company recently filed a 510(k) Pre-Market Notification (a "510(k)
Notification") with the U.S. Food and Drug Administration (the "FDA") for its
In-Tac Surgical System to treat women with incontinence. The In-Tac System
incorporates the Company's proprietary bone anchors and anchor insertion
device to enable a minimally invasive transvaginal bladder neck suspension
procedure. Bladder neck suspensions are performed primarily to relieve severe
stress incontinence that is caused by descent (prolapse) of the urethra and
bladder neck. Approximately 120,000 bladder neck suspension surgeries were
performed in 1993 in the U.S. using methods which typically require abdominal
or vaginal incisions and general anesthesia. In contrast, the In-Tac procedure
requires no abdominal or vaginal incisions and can be performed using local
anesthesia, which introduces less trauma to the patient, shortens the post-
operative recovery period, and reduces the need for hospitalization.

The Company is also developing a non-surgical, remote controlled,
intraurethral valved catheter, In-Sure, for the treatment of stress
incontinence. In-Sure includes a disposable silicone catheter that is intended
to be inserted by a healthcare provider into a woman's urethra and replaced
approximately once per-month. The catheter incorporates a proprietary valve
system that is opened and closed with a remote control. In-Sure is intended to
offer a non-surgical alternative for the treatment of stress incontinence that
is easy and convenient for the patient to use. The Company is also developing
a variation of this product, the In-Flow, which incorporates an intraluminal
pump that can actively void a patient's bladder. In-Flow is intended to offer
an alternative to continuous Foley catheterization and intermittent self-
catheterization for patients with overflow incontinence associated with atonic
bladder. In-Flow is intended to avoid the inconvenience associated with
currently available treatment options and potentially reduce associated
complications, including recurrent urinary tract infections. The Company is
also developing male versions of these products, In-Sure-M and In-Flow-M. The
Company has completed pilot trials of In-Flow in Israel and Europe and intends
to initiate multicenter clinical trials in Europe and the U.S. in 1997.

The Company is also developing a number of complementary diagnostic and
therapeutic products to manage incontinence. In-Probe is a diagnostic system
being designed to identify quantitatively the specific cause of incontinence
and assist the physician in choosing an appropriate course of treatment. The
Company believes its In-Tele device, a small wireless disposable transmitter
inserted into the bladder, will enable more accurate diagnosis of urge
incontinence and may reduce the incidence of unnecessary surgeries. In-Bio is
a portable wireless biofeedback device which is being designed to increase the
effectiveness of pelvic floor training exercises by providing a convenient
method of feedback to patients outside of a physician's office. The Company is
also developing the In-Cuff, a permanent, implantable, remote-controlled,
artificial sphincter for the treatment of incontinence in men. Additionally,
Influence is seeking to apply its technology in the development of medical
devices outside the field of incontinence.

22
<PAGE>

BACKGROUND

Incontinence Overview

Urinary incontinence, the involuntary leakage of urine, is a significant
health problem afflicting approximately 10 million women and 3 million men in
the U.S. It is estimated that 50% of the 1.5 million nursing home residents
suffer from incontinence. The U.S. Department of Health and Human Services
Agency for Health Care Policy and Research ("AHCPR"), estimated that costs
associated with the management and treatment of urinary incontinence in the
U.S. exceed $16 billion annually, including over $5 billion related to
patients in nursing homes. Incontinence may be caused by a wide range of
factors, including childbirth, menopause, surgery, obesity, drugs and
neurological damage. Incontinence patients suffer from a variety of physical
and psychological problems including urinary tract infections, rashes,
pressure sores, embarrassment, decreased sexual activity, depression and loss
of productive activity.

Anatomy and Physiology of the Urinary Tract System

The urinary tract aids the body in eliminating waste. The kidneys process
blood and filter waste products from the circulatory system, creating urine to
remove the waste. The ureters drain urine from the kidneys into the bladder,
which serves as a reservoir until urination. The urethral sphincter is a group
of muscles at the base of the bladder that surrounds the bladder neck and
urethra and aids the bladder in maintaining continence. The urethra is the
tube through which urine flows when the bladder empties. Emptying the bladder
is caused by a combination of involuntary and voluntary nervous system
activity. When the bladder becomes full, stretch receptors located in the
bladder wall transmit impulses through the nervous system initiating a desire
to urinate. A reflex signal is transmitted to both the bladder wall (the
detrusor muscle), causing it to contract, and to the urethral sphincter which
relaxes, allowing urination to occur.

[DIAGRAM OF MALE PELVIC ANATOMY]

[DIAGRAM OF FEMALE PELVIC ANATOMY]

23
<PAGE>

Types and Causes of Incontinence

There are four main types of urinary incontinence, as defined in the
Clinical Practice Guideline issued by the AHCPR. Each type of incontinence may
be caused by multiple underlying pathologies, and patients may experience more
than one type of incontinence, often making effective diagnosis and treatment
difficult.

Stress incontinence. Stress incontinence is the involuntary loss of urine
during physical activities which increase abdominal pressure, such as
exercise, laughing, coughing, and sneezing. In women, stress incontinence is
commonly caused by hypermobility of the bladder neck and the urethra--a kind
of prolapse (descent) of the urethra and bladder neck during exertion.
Urethral hypermobility is generally caused by childbirth, obesity, menopause,
hysterectomy or chronic coughing. Stress incontinence may also result from
intrinsic sphincter deficiency, which is dysfunction of the muscles of the
bladder sphincter. Intrinsic sphincter deficiency can result from previous
pelvic surgery, such as bladder neck suspension procedures, pelvic or urethral
trauma, radiation therapy, or a lower spinal cord disorder. Stress
incontinence is the primary pathology in approximately 50% of women with
incontinence. Stress incontinence in men may be caused by sphincter damage
from prostate or urethral surgery or from pelvic or urethral trauma.

Urge incontinence. Urge incontinence results from an abrupt and
uncontrollable desire to void. It is caused by involuntary contractions
(spasms) of the bladder wall muscle that may be the result of a stroke or
neurological disorders such as multiple sclerosis. In men, benign prostatic
hyperplasia (BPH) often causes such bladder wall muscle instability. Urge
incontinence is the primary pathology in 25% to 30% of women with
incontinence.

Mixed incontinence. Mixed incontinence involves a combination of urge and
stress incontinence. Many frail or elderly patients have mixed incontinence
that can be exacerbated by impairments of physical or cognitive functioning.

Overflow incontinence. Overflow incontinence is the involuntary loss of
urine resulting from an overdistended bladder, frequently associated with an
underactive (atonic) bladder wall muscle, which leads to the bladder becoming
filled with urine, without a corresponding desire to void. At a certain point,
too much urine collects in the bladder to be contained, and the urine
overflows through the urethra. Underlying conditions that may cause overflow
incontinence include chronic urethral obstruction that impairs detrusor
activity, use of certain medications, fecal impaction, pelvic surgery, or
neurologic conditions such as diabetic neuropathy or low spinal cord injury.
Patients with multiple sclerosis often develop overflow incontinence due to
the use of certain medications. Patients with overflow incontinence often have
recurrent urinary tract infections due to urine that remains in the bladder
after voiding, leaving a stagnant pool of urine prone to infection.

Current Diagnostic Techniques

Incontinence is usually evaluated by gynecologists, urologists or
urogynecologists. Accurate diagnosis of the type of incontinence is essential
as different types of incontinence indicate different treatment options. The
basic tools and techniques used by physicians for diagnosing incontinence
include patient questionnaires, urodynamic evaluations (cystometry), leak
point pressure tests and "Q-tip" tests.

Cystometry is the urodynamic evaluation of bladder function in men and women
performed in a physician's office. Office based cystometrograms are currently
performed using machines which cost approximately $10,000 to $40,000. As part
of these evaluations, a catheter is passed through the urethra into the
bladder, and water is pumped into the bladder. One sensor at the end of the
catheter measures bladder pressure and a second sensor in the rectum or vagina
measures intra abdominal pressure. Relying on these sensors, the physician
attempts to measure the patient's daily range of bladder pressure and
behavior, including an indication of bladder contractions (indicating the
presence of urge incontinence), the patient's feeling of fullness, a
measurement of maximum bladder capacity and other measurements. The physician
also attempts to visually determine leak point pressure, the point at which
urine leaks out of the urethra. Leak point pressure provides a measure of the
integrity of the urethral musculature.

24
<PAGE>

The "Q-tip" test is the test most frequently used to diagnose stress
incontinence in women caused by urethral hypermobility, and to distinguish
this condition from incontinence caused by intrinsic sphincter deficiency. In
this test, the physician inserts a cotton swab into the urethra of a female
patient and visually assesses the degree of movement of the swab while the
patient coughs or bears down. A greater change in angle is equated with
urethral hypermobility, for which bladder neck suspension surgery may be the
preferred treatment. Little or no movement, together with low leak point
pressure, is equated with intrinsic sphincter deficiency, for which bladder
neck suspension surgery is not recommended.

The Company believes that the currently available diagnostic tools and
techniques are inadequate, and may lead to frequent misdiagnoses of stress and
urge incontinence. A significant potential consequence of the misdiagnosis of
incontinence is the performance of inappropriate surgery.

Current Treatments

Physicians currently treat incontinence with a variety of techniques and
therapies that correspond with the type and severity of incontinence
diagnosed. The discussion below describes the principal treatment options
available, including certain products of which the Company is aware that are
under development or are not yet available for commercial sale in the U.S.

Diapers and Absorbent Pads. Adult diapers and pads, which capture urine upon
leakage, function similarly to baby diapers, and are used for all types of
incontinence. While these products have improved over the past several years,
drawbacks include the lack of control over urine flow, bulky size, rashes and
related discomfort. These may lead to embarrassment about appearance and odor,
perceived social stigma, and a significant compromise in freedom of lifestyle.
The Company believes that many patients choose absorbent products to manage
incontinence due to the convenience and privacy of purchasing these products
without seeing a physician. The Company estimates that a typical urinary
incontinence sufferer in the U.S. who regularly uses adult diapers and
incontinence pads spends approximately $1,200 to $1,500 per year on these
products and that U.S. retail sales of adult diapers are over $1 billion
annually.

Behavioral Therapy. Behavioral therapy and related techniques, which are
used to treat both stress and urge incontinence in women, include bladder
habit training, pelvic muscle exercises, biofeedback and pelvic floor muscle
electrical stimulation. Pelvic muscle training exercises are generally
designed to improve pelvic muscle strength in patients with stress
incontinence. Biofeedback treatments, which are designed to improve the
success of pelvic muscle training exercises, often involve numerous training
sessions with vaginal probes, usually in a physician's office. A survey
conducted by The National Association for Incontinence of its members revealed
that 50% of respondents with incontinence practice pelvic muscle training
exercises. While these procedures have the potential to provide relief of
incontinence, the Company believes that due to the lack of convenient training
devices, many patients do not continue treatment.

Vaginal Inserts. Inserts or pessaries are devices used to treat stress
incontinence in women. These devices are roughly the size and shape of
contraceptive diaphragms and are used to achieve continence by obstructing the
bladder neck and urethra by applying pressure through the neighboring vaginal
cavity or by elevating the bladder neck and urethra to a preprolapsed
position. While often helpful, these devices are not curative. Potential side
effects from the use of these devices include infection, vaginal discharge and
tissue erosion. These devices require frequent removal and cleaning.

Catheters, Clamps and Urethral Plugs. Patients with overflow and stress
incontinence may also be treated with simple devices that either obstruct or
allow controlled flow of urine from the body. Female patients with overflow
incontinence may use a permanent catheter or a single-use catheter to
repeatedly self-catheterize when voiding is desired. Women with stress
incontinence may be treated with single-use intraurethral plugs or externally
applied adhesive patches, both of which are intended to stop the flow of
urine. Male patients experiencing overflow incontinence may be treated with an
indwelling Foley catheter or condom catheter with an external urine collection
bag, or a penile clamp device. These products enable the continuous or
intermittent flow of urine. The Company believes these products may be
inconvenient for certain patients to use, and may cause irritation, tissue
erosion and recurrent urinary tract infections.

25
<PAGE>

Pharmaceuticals. In general, drugs available for the treatment of urinary
incontinence act on the nerve receptors associated with the bladder
neurotransmitter system, and are used to treat urge incontinence in men and
women. Although drugs can alleviate the symptoms of urge incontinence, they
are not curative. Additionally, drugs may cause potential adverse
cardiovascular side effects, dizziness, weakness, and urinary retention.

Injectable Materials. Women experiencing stress incontinence caused by
intrinsic sphincter deficiency may be treated with injectable bulking agents,
including Teflon, collagen and other materials, which are inserted through a
needle into the area around the urethra to create a mild obstruction. These
procedures often require repeat injections, making this treatment expensive
and time consuming.

Surgery. Surgery is commonly used to treat women whose primary pathology is
stress incontinence. In the surgical procedure known as a bladder neck
suspension, the physician elevates and stabilizes the urethra and the bladder
neck in order to restore continence by preventing urethral and bladder neck
descent (prolapse) during exertion. This repositioning is accomplished by
elevating the bladder neck and urethra together with periurethral tissue to
their original position. If intrinsic sphincter deficiency is present, a
surgical procedure known as a sling operation can be performed, in which a
sling is made across the urethra and bladder neck. Both types of surgery are
complicated procedures in which the outcome depends on a number of factors,
including the severity of pathology and the surgeon's skill. Current surgical
procedures require vaginal or abdominal incisions, which are traumatic, and
which normally require a hospital stay and a period of several weeks until
full recovery. Approximately 120,000 bladder neck suspensions were performed
in the United States in 1993.

Men with stress incontinence may be treated with a surgically implantable
device which applies pressure around the urethra and closes its lumen to
restore continence. The implanted device contains a fluid filled reservoir in
the abdomen and a manually activated pump located in the scrotum to release
periurethral pressure and permit urination. The Company believes that this
device is used relatively infrequently primarily because of its inconvenience,
significant complication rate, and pain associated with misuse.

THE INFLUENCE INCONTINENCE MANAGEMENT SYSTEM

The Company's goal is to provide health care practitioners and payors with a
comprehensive set of protocols utilizing its diagnostic and therapeutic
devices for the management of incontinence. The Company's product development
strategy is based on the belief that current incontinence diagnostic tools and
treatment options have significant limitations. The Company intends to offer
the physician complementary diagnostic and therapeutic products for the
management of incontinence. The diagrams below illustrate the application of
the Company's proposed incontinence management system.

26
<PAGE>

[Included are two separate flowcharts, one for female patients with urinary
problems and one for male patients with urinary problems. Each flowchart
outlines the steps a physician would take in diagnosing and treating female
and male incontinence. The flowcharts also depict which steps might
incorporate the Company's proposed diagnostic and treatment products,
including In-Probe, In-Tele, In-Bio, In-Tac, In-Sure, In-Flow, In-Sure-M, In-
Flow-M and In-Cuff.]

27
<PAGE>

The Company is developing a range of products to provide an integrated
solution for the diagnosis and treatment of incontinence in men and women. The
Company believes that its products, if successfully introduced, can result in
significant cost savings in the management of incontinence. Statements
regarding the timing of patient studies and regulatory filings, and the
proposed regulatory path for the Company's proposed products are forward-
looking statements reflecting the Company's current plans, estimates and
beliefs. Factors which may cause actual results to differ materially from such
statements include, but are not limited to, those discussed in "Risk Factors--
Development Stage Company," "Risk Factors--Risks Relating to Products Under
Development," and "Risk Factors--No Assurance of Regulatory Approvals;
Potential Delays."

<TABLE>
<CAPTION>
INFLUENCE PRODUCT DEVELOPMENT OVERVIEW
- -----------------------------------------------------------------------------------------------------------------------------------
PROPOSED REGULATORY
PRODUCT DESCRIPTION PRODUCT STATUS PATH
- -----------------------------------------------------------------------------------------------------------------------------------
DIAGNOSTIC DEVICES
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
In-Probe A urodynamics and pres- Ongoing international pilot trial 510(k)
sure recording system
which can quantitatively
record urethral
hypermobility and leak
point pressure.
- -----------------------------------------------------------------------------------------------------------------------------------
In-Tele A small wireless dispos- Preclinical 510(k)
able transmitter that is
inserted into the blad-
der to transmit bladder
pressure data to a belt-
mounted receiver.
- -----------------------------------------------------------------------------------------------------------------------------------
FEMALE THERAPEUTIC DEVICES
- -----------------------------------------------------------------------------------------------------------------------------------
In-Bio A wireless pelvic floor Ongoing international pilot trial 510(k)
training and bio-feed-
back transmitter that is
inserted into the vagina
to measure intra-abdomi-
nal pressure and peri-
neal muscle contrac-
tions.
- -----------------------------------------------------------------------------------------------------------------------------------
In-Tac A minimally invasive 510(k) filed June 1996 510(k)
surgical system for per-
forming bladder neck
suspension surgery in
women with stress incon-
tinence utilizing the
Company's proprietary
bone anchors and anchor
insertion device.
- -----------------------------------------------------------------------------------------------------------------------------------
In-Sure A temporary Preliminary clinical trial initiated PMA
intraurethral valved
catheter that functions
as a remote-controlled
artificial sphincter,
providing complete and
controllable continence
for women with stress
incontinence.
- -----------------------------------------------------------------------------------------------------------------------------------
In-Flow A temporary Ongoing international pilot trial 510(k) or PMA
intraurethral valved
catheter containing an
intraluminal pump assem-
bly that functions as a
remotely controlled ar-
tificial sphincter and
urine pump providing
complete and controlla-
ble continence in women
with atonic bladder.
- -----------------------------------------------------------------------------------------------------------------------------------
MALE THERAPEUTIC DEVICES
- -----------------------------------------------------------------------------------------------------------------------------------
In-Sure-M A modified version of Preclinical 510(k) or PMA
the In-Sure remote con-
trolled intraurethral
valved catheter for use
in men with stress in-
continence or post-sur-
gical urinary retention.
- -----------------------------------------------------------------------------------------------------------------------------------
In-Flow-M A modified version of Preclinical 510(k) or PMA
the In-Flow remote con-
trolled intraurethral
valved catheter contain-
ing an intraluminal pump
for use in men with
atonic bladder.
- -----------------------------------------------------------------------------------------------------------------------------------
In-Cuff A permanent, Preclinical PMA
implantable, remote con-
trolled, artificial dy-
namic sphincter.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

28
<PAGE>

DIAGNOSTIC DEVICES

In-Probe. In-Probe, which is comprised of a disposable catheter and an
attached monitor, is a portable cystometry system combined with sensors which
permit quantitative measurement of urethral hypermobility and bladder leak
point pressure. In-Probe is designed to provide a more accurate and
quantitative diagnosis of urethral hypermobility than the diagnosis achievable
using current procedures, such as the Q-tip test.

Pilot studies of In-Probe commenced in June 1996. The Company currently
plans to submit a 510(k) Notification to the FDA with respect to this product.
See "Business--Government Regulation."

In-Tele. In-Tele is a small wireless disposable transmitter which is
inserted into the bladder of a male or female patient. The patient carries a
reusable, belt mounted receiver, which records bladder pressure activity for 8
to 24 hours, enabling more accurate diagnosis of urge incontinence or other
bladder abnormalities than current, in-office diagnostic techniques. By
detecting patients with urge incontinence, for whom bladder neck surgery is
likely to fail, In-Tele has the potential to reduce the incidence of
unnecessary surgeries.

In-Tele is in the early stages of development and design, with pilot studies
expected to commence by the end of 1996. The Company currently plans to submit
a 510(k) Notification to the FDA with respect to this product. See "Business--
Government Regulation."

FEMALE THERAPEUTIC DEVICES

In-Bio. In-Bio is a wireless pelvic floor training and bio-feedback device
that is inserted into the vagina to measure intra-abdominal pressure and
contractions of perineal muscles. These measurements, which are wirelessly
transmitted to a small, portable monitor worn on the patient's belt, are
intended to help a patient learn to contract pelvic floor musculature without
increasing abdominal pressure. Unlike other bio-feedback devices, In-Bio is
wireless, allowing the patient to train while doing other activities. In-Bio
is designed to provide immediate and continuous feedback to the patient,
rather than relying on a physician's observations during brief and infrequent
office visits. In-Bio may reduce the number of patients referred for surgery
by increasing the acceptance, practice and success of pelvic floor training
exercises.

Pilot studies of In-Bio commenced in June 1996. The Company currently
expects to submit a 510(k) Notification to the FDA with respect to this
product. See "Business--Government Regulation."

The In-Tac Surgical System. The Company has developed a system which
incorporates the Company's proprietary bone anchors and anchor insertion
device to enable a minimally invasive transvaginal bladder neck suspension
procedure. In the In-Tac surgical procedure, the physician affixes prolapsed
periurethral tissue to the pubic bone by means of bone anchors threaded with
sutures, in order to return the urethra and bladder neck to their original,
preprolapsed positions, and to prevent urethral hypermobility when the
patient's intra-abdominal pressure increases through exertion. The procedure
is performed transvaginally, by a physician utilizing the Company's
proprietary insertion device which inserts the bone anchors threaded with
sutures through the anterior vaginal wall and into the posterior wall of the
pubic bone. The In-Tac technique does not require abdominal or vaginal
incisions and reduces the post-operative recovery period and the need for
hospitalization. The bone anchors used in this procedure are made from medical
grade nitinol, an alloy with a shape memory, and are designed to resist being
pulled out from their insertion point in the pubic bone.

The In-Tac Surgical System is in the advanced stages of design and
development. To date, 45 patients aged 40-65 have undergone treatment with the
In-Tac Surgical System in an international pilot trial. The mean follow-up
time post-surgery is eight months, with the longest follow up being 15 months.
Results reveal a 90% success rate as defined by continence and there were no
adverse experiences of bleeding or osteomyelitis. Patients were catheterized
with a Foley catheter, which was removed an average of one to three days after
the procedure, and suprapubic catheterization was not needed. The Company
submitted a 510(k) Premarket Notification to the FDA for the In-Tac Surgical
System in June 1996. See "Business--Government Regulation."

29
<PAGE>

In-Sure. In-Sure, for women with stress incontinence, is a temporary
intraurethral valved catheter that functions as a remote-controlled artificial
sphincter, providing complete and controllable closure of the urethra. The
remote control activator, which opens and closes the sphincter, is wireless,
small and easy for the patient to operate. To urinate, the patient holds the
remote-control unit near the lower abdominal area and presses the "open"
switch, allowing urine to flow through the urethra. Pressing the "close"
switch closes the valve and reestablishes continence between urinations. In-
Sure offers a non-surgical alternative for the treatment of stress
incontinence for women in whom surgery is contraindicated or undesirable. In-
Sure is designed to be inserted by a healthcare professional into the urethra
without anesthesia in an atraumatic, non-surgical outpatient procedure
approximately once per month. In addition, In-Sure is easily and
atraumatically removed.

The Company has finalized the design of the In-Sure device, and intends to
start clinical trials in the first half of 1997. The Company is currently
evaluating its regulatory strategy for the In-Sure device and although the
Company currently is working under the assumption that a PMA might be
required, the Company intends to engage in further discussions with the FDA
prior to making another regulatory submission for the device. See "Business--
Government Regulation."

In-Flow. In-Flow, for women with overflow incontinence caused by atonic
bladder, is a temporary intraurethral valved catheter containing an
intraluminal pump assembly which functions as a remotely controlled artificial
sphincter and urine pump providing complete and controllable continence and
normalized urine flow. To urinate, the patient holds the activator near the
lower abdomen and presses a switch that activates the pump which draws urine
from the bladder until the bladder is completely emptied. When urine flow has
completely stopped, the patient releases the switch to stop the pump, and
reestablishes continence between urinations. In-Flow uses the Company's
proprietary remote control, insertion and fixation technologies incorporated
in the Company's proposed In-Sure product. Like In-sure, In-Flow is designed
to be inserted by a healthcare professional into the urethra without
anesthesia in an atraumatic, non-surgical outpatient procedure approximately
once per month and can be easily and atraumatically removed.

In-Flow is designed to protect the patient from overdistention of the
bladder, overflow incontinence and post-voiding residual urine complications,
including recurrent urinary tract infection. If In-Flow is approved by the
FDA, the Company believes it will be preferred over indwelling and
intermittent catheterization as a treatment for patients with atonic bladder.
The Company is not currently aware of any products under development that can
conveniently and quickly empty an atonic bladder, while restoring continence
between urinations.

Ten female patients with atonic bladders have been treated with In-Flow
during a pilot trial in Israel. The mean follow up has been seven to eight
months with the longest follow up being 14 months. Three patients discontinued
within one week of starting treatment due to discomfort or previously
undetected symptoms of urge incontinence for which use of In-Flow is not
indicated. The patients in this pilot study had no post voiding residual
urine. The flow rate when the pump was activated approximated normal urine
flow.

The Company has finalized the design of In-Flow. Based on conversations the
Company has had with the FDA to date, the Company believes it may be possible
to obtain market clearance for the In-Flow device through the submission of a
510(k) Notification with supporting clinical data. The Company intends to
discuss its clinical protocols with the FDA prior to submitting an IDE to
conduct clinical studies of the device, which the Company intends to commence
in early 1997. See "Business--Government Regulation."

MALE THERAPEUTIC DEVICES

In-Sure-M. The Company is developing a modified version of the In-Sure for
use primarily in men with stress incontinence and for use in men with acute
post-surgical urinary retention. The internal structure of the device is
similar to that of the female product. Externally the catheter will have a
different shape for temporary placement and retention between the bulbar
urethra and the bladder neck. In-Sure-M is being designed to be inserted under
local or topical anesthesia. This device is currently in pre-clinical
development.

30
<PAGE>

In-Flow-M. The Company is also developing a modified version of the In-Flow
for use in men with atonic bladder. The internal structure of the device is
similar to In-Flow. Externally the catheter will be similar to the In-Sure-M
and will be inserted in the same way. This device is currently in pre-clinical
development.

In-Cuff. In-Cuff is a permanent, implantable, remote controlled, artificial
sphincter. In-Cuff is expected to have an intra-abdominal pressure regulator
balloon connected to a periurethral cuff, and to allow sphincter pressure to
dynamically adjust to changes in abdominal pressure, thereby minimizing the
risk of urethral atrophy caused by constant sphincteric pressure. Using the
Company's proprietary energy transfer technology, the device is designed to be
operated by a remote control unit to fully open or close the periurethral
cuff, permitting normal urination, obviating the need for an intra-scrotal,
hand-operated pump. In-Cuff is in an early stage of preclinical development.

OTHER APPLICATIONS OF THE COMPANY'S TECHNOLOGY

The Company's proprietary technology may be applicable in medical devices
outside the Company's core family of incontinence products. The Company may
choose to develop or license these technologies to others for the following
applications:

Penile Prosthesis. The Company's proprietary remote control technology is
being applied to the development of a penile prosthesis for men with
impotence, to compete with currently available prostheses which operate on a
manual pressure system. This product is currently in the preclinical stage of
development.

Heart Pump. The Company has commenced development of a valveless
intraluminal left ventricle assist device which will employ the Company's
proprietary wireless energy transfer technology. This product is currently in
the preclinical stage of development.

Balloon Catheter. The Company has designed a patented low profile perfusion
balloon catheter, having the same dimensions as a conventional balloon
catheter, with blood flow rates that the Company believes are superior to
available perfusion catheters for balloon angioplasty procedures.

Bone Anchors for Orthopedic Use. The Company believes that its nitinol bone
anchors and related inserter, developed for the bladder neck suspension
procedure, may be developed or licensed for use in orthopedic applications.

Petal-Retention Technology. The Company believes that the petal-like fins
which enable the urethral catheter to be fixated at the bladder neck may be
applied in non-urological devices, such as tracheostomy and gastrostomy
devices.

MARKETING AND SALES

In the U.S., the Company intends to distribute its products, if approved,
through a direct sales force to physicians specializing in managing
incontinence, including gynecologists, urologists and urogynecologists. The
Company expects that marketing efforts will be focused on healthcare providers
and will include direct advertising and training seminars to increase
awareness of the Company's products. The Company may also implement a general
media campaign intended to raise the awareness of incontinence and the
available treatment options. The Company will also seek alliances with various
patient groups, including incontinence groups, support organizations for
diabetics, spinal cord transection patients and people with multiple
sclerosis.

Internationally, the Company will seek market-by-market distribution
alliances to introduce, market and sell its products. The Company will
coordinate worldwide marketing and sales from its U.S. corporate headquarters.

Establishing a marketing and sales capability sufficient to support sales in
commercial quantities will require significant resources, and there can be no
assurance that the Company will be able to recruit and retain qualified
marketing personnel, direct sales personnel or contract sales representatives
or that future sales efforts of the Company will be successful. Furthermore,
due to the innovative nature of the Company's proposed products and

31
<PAGE>

the limited market awareness of such products, the Company anticipates that
the marketing process may be lengthy, entailing the education of physicians in
the proper use and advantages of the Company's proposed products. In addition,
the Company intends to begin marketing its proposed products outside the
United States through distributors. To date, the Company has not entered into
any distributor agreements and there can be no assurance that the Company will
be able to engage qualified distributors in these markets in a timely manner.
While the Company is committed to establishing an effective distribution
channel for its products, there can be no assurance that the Company will be
successful in doing so. The failure to establish and maintain an effective
distribution channel for the Company's products, or to retain qualified sales
personnel to support commercial sales of the Company's products, would have a
material adverse effect on the Company's business, financial condition and
results of operations.

THIRD-PARTY REIMBURSEMENT

In the U.S., the Company's products generally will be purchased directly by
patients, physician groups, hospitals, and/or dealers. Although some of the
Company's products may not be reimbursed, the Company's success will be
partially dependent on its ability to obtain satisfactory reimbursement from
third-party payors, including private insurance companies, health maintenance
organizations, preferred provider organizations, other managed care providers,
and Medicaid.

The Health Care Finance Administration ("HCFA") administers the Medicare
program and determines whether to provide coverage for a particular medical
product, procedure or other service. The Company intends to make application
to Medicare for reimbursement eligibility for its products. Under the Medicaid
program, states generally reimburse for approved procedures on a reasonable
cost or fee schedule basis.

A key component in the reimbursement decision by HCFA and most private
insurers is the assignment of a Current Procedural Terminology ("CPT") code
which is used in the submission of claims to insurers for reimbursement of
medical services. CPT codes are assigned, maintained and revised by the CPT
editorial board administered by the American Medical Association. The Company
intends to petition the CPT editorial board for codes for its proposed
products. There can be no assurance that the Company will succeed in securing
recognition by the CPT editorial board of specific codes for its proposed
products.

Medicare and many other third-party payors do not reimburse for procedures
deemed "experimental" or "investigational." There is usually no precise date
when a procedure ceases to be experimental or investigational, but devices in
clinical investigation under an Investigational Device Exemption ("IDE") are
usually deemed to be experimental or investigational. See "Business--
Government Regulation." Furthermore, there can be no assurance, even if the
Company's products are cleared or approved by the FDA for new clinical
applications, that any reimbursement will be available for such procedures.

The Company's strategy for obtaining reimbursement in the U.S. is to obtain
appropriate reimbursement codes and perform outcome studies in conjunction
with clinical trials to establish the efficacy and cost effectiveness of its
products compared to competing diagnostic and therapeutic products. The
Company intends to use this health economics data when approaching health care
payors to obtain reimbursement authorization.

The Company currently has no experience in obtaining reimbursement for its
products in the United States or other countries. In addition, third-party
payors are routinely limiting reimbursement coverage for medical devices and
in many instances are exerting significant pressure on medical suppliers to
lower their prices. The Company could also be adversely affected by changes in
reimbursement policies of government or private health care payors,
particularly to the extent that any such changes affect reimbursement for
therapeutic or diagnostic procedures in which the Company's products are used.
Failure by physicians, hospitals and other users of the Company's products to
obtain sufficient reimbursement from healthcare payors for procedures in which
the Company's products are used, or adverse changes in government and private
third-party payors' policies toward reimbursement for such procedures, could
have a material adverse effect on the Company's business, financial condition
and results of operations.

32
<PAGE>

There is widespread concern that health care reform proposals and related
market initiatives in the U.S. may lead third-party payors to decline or
further limit reimbursement. The extent to which third-party payors may
determine that the use of the Company's products will save costs or will at
least be cost effective is highly uncertain, and it is possible that they will
limit reimbursement for products developed by the Company. Because of
uncertainties regarding the possible health care reform measures that could be
proposed and initiatives to reduce costs by private payors, the Company cannot
predict whether reimbursement for the Company's products will be affected or,
if affected, the extent of any effect. Third-party payors may also decline to
reimburse for procedures, supplies or services determined to be not "medically
necessary" or "reasonable."

Market acceptance of the Company's products in international markets may be
dependent in part upon the availability of reimbursement within prevailing
healthcare payment systems. Reimbursement and health-care payment systems in
international markets vary significantly by country, and include both
government-sponsored and private healthcare insurance. Although the Company
will seek international reimbursement approvals, obtaining such approvals can
require 12 to 18 months or longer and there can be no assurance that any such
approvals will be obtained in a timely manner, if at all. Failure to receive
additional international reimbursement approvals could have a material adverse
effect on market acceptance of the Company's products in the international
markets in which the Company is seeking approvals and could have a material
adverse effect on the Company's business, financial condition and results of
operations.

MANUFACTURING

The Company currently intends to manufacture substantially all of its
products at its facility in Israel. The Company has no experience in
manufacturing commercial quantities of its proposed products and currently has
a facility capable only of limited manufacturing of its proposed products for
use in clinical trials and production of certain proposed products in
commercial quantities. In order to successfully commercialize its proposed
products, the Company will have to increase the number of units it can
produce, reduce per-unit manufacturing costs and achieve the extremely high
quality standards required for such products. In order to manufacture in
commercial quantities on the foregoing basis, the Company will be required
either to enhance significantly its existing capabilities and equipment and
recruit and retain a sufficient number of skilled manufacturing personnel, or
to enter into arrangements with third parties to manufacture its proposed
products. Prior to commencing manufacturing of any products for commercial use
in the United States, the Company's facility will require FDA determination of
compliance with GMP requirements. There can be no assurance that the Company
will be able to establish manufacturing capability, obtain GMP approval, make
the transition to commercial manufacturing successfully or manufacture its
products cost-effectively, or at all. Failure to do so could have a material
adverse effect on the Company's business, financial condition and results of
operations.

The principal materials used in the Company's products are currently
available from several sources. The Company may, in the future, seek to enter
into supply agreements with certain suppliers if it considers this to be a
cost-effective means of assuring the availability of essential materials. Any
interruption in the supply of raw materials currently used by the Company
could have an adverse effect on the Company's business.

PATENTS, LICENSES AND PROPRIETARY TECHNOLOGY

The Company's success will depend in part on its ability to obtain and
maintain patent protection for its products, to preserve its trade secrets and
to operate without infringing the proprietary rights of third parties. The
Company's strategy regarding the protection of its proprietary rights and
innovations is to seek patents on those portions of its technology that it
believes are patentable and to protect as trade secrets other confidential and
proprietary information.

As of June 30, 1996, the Company had 4 U.S. patent applications, 2 U.S.
provisional patent applications, 5 PCT patent applications and 10 foreign
patent applications pending relating to the Company's technology underlying
its products. In addition, the Company has an exclusive world-wide license to
one issued U.S. patent, one pending U.S. patent application and 3 pending
foreign patent applications, which cover certain technology

33
<PAGE>

related to the In-Tac System, including a method of transvaginal bladder neck
suspension surgery using an anchor and suture inserted into the pubic bone. In
consideration for this license, the Company will pay to the owner thereof a
royalty of 0.5% of the income derived from that technology. However, there can
be no assurance as to the degree of protection offered by the claims of this
patent or that any patents will be issued with respect to the Company's
pending patent applications. In addition, methods of treating humans are
generally not patentable outside of the United States. See "Risk Factors--
Dependence on Proprietary Technology." Technology related to the In-Probe
device is licensed to the Company pursuant to a royalty arrangement with Dr.
Jerry G. Blaivas. See "Certain Transactions."

Some of the technology used in, and that may be important to, the Company's
products is not covered by any patent or patent application of the Company.
The Company seeks to maintain the confidentiality of its proprietary
technology by requiring employees who work with proprietary information to
sign confidentiality agreements and by limiting access by parties outside the
Company to such confidential information. There can be no assurance, however,
that these measures will prevent the unauthorized disclosure or use of this
information, or that others will not be able to independently develop such
information. Moreover, as is the case with the Company's patent rights, the
enforcement by the Company of its trade secret rights can be lengthy and
costly, with no guarantee of success.

To date, no claims have been brought against the Company alleging that its
technology or products infringe intellectual property rights of others.
However, there can be no assurance that such claims will not be brought
against the Company in the future or that any such claims will not be
successful. The Company has been notified by a third party that it has filed
U.S. and PCT patent applications directed to methods of treating urinary
incontinence by bladder neck suspension through the use of an anchor and
suture inserted into bone. The Company has conducted a review of the third
party's relevant issued patents and concluded that no patent infringement
liability currently exists. In addition, the Company believes, based on its
review of available documents, that it is unlikely that a valid patent will
issue having claims sufficiently broad to interfere with the Company's ability
to sell its proposed In-Tac Surgical System. However, there can be no
assurance that U.S. or other patents will not issue in the future in the name
of this particular third party or another containing claims which would
constrain the Company's ability to manufacture and sell its products or
prevent customers of the Company from practicing the method of bladder neck
suspension contemplated by use of the Company's In-Tac surgical system. The
Company is also aware of a number of U.S. patents of third parties related to
intraurethral valved catheters for the treatment of incontinence. The Company
believes that Influence's proposed devices will not infringe the claims of
those patents. Although the Company has not received any notice or threat of
patent infringement related to such patents, there can be no assurance that a
suit for patent infringement will not be filed by any of the patent owners or
licensees in the future, that the Company will prevail in any suit for patent
infringement, or that the Company will not be required to take a license under
unfavorable terms or be enjoined from manufacturing and selling its
intraurethral valved catheter incontinence devices.

GOVERNMENT REGULATION

The medical devices to be marketed and manufactured by the Company are
subject to extensive regulation by the FDA and, in some instances, by foreign
governments. Pursuant to the FDC Act, the FDA regulates the clinical testing,
manufacture, labeling, distribution and promotion of medical devices.
Noncompliance with applicable requirements can result in, among other things,
fines, injunctions, civil penalties, recall or seizure of products, total or
partial suspension of production, failure of the government to grant premarket
clearance or premarket approval for devices, withdrawal of marketing approvals
and criminal prosecution.

Under the FDC Act, medical devices are classified into one of three classes
(i.e., class I, II, or III) based on the controls necessary to reasonably
ensure their safety and effectiveness. Safety and effectiveness can reasonably
be assured for class I devices through general controls (e.g., labeling,
premarket notification and adherence to GMPs) and for class II devices through
the use of general and special controls (e.g., performance standards, post
market surveillance, patient registries, and FDA guidelines). Generally, class
III devices are those which must receive premarket approval by the FDA to
ensure their safety and effectiveness (e.g., life-sustaining, life-supporting
and implantable devices, or new devices which have been found not to be
substantially equivalent to legally marketed devices).

34
<PAGE>

Before a new device can be commercially introduced to the market, the
manufacturer generally must obtain FDA marketing clearance through a 510(k)
premarket notification or marketing approval through a premarket approval
application ("PMA"). Clearance of a 510(k) Notification will be granted if the
submitted information and data establish that the proposed device is
"substantially equivalent" to a legally marketed class I or class II medical
device, or to a class III medical device for which the FDA has not called for
PMAs. Commercial distribution of a device for which a 510(k) Notification is
required can begin only after the FDA issues an order finding the device to be
"substantially equivalent" to a predicate device. The FDA has recently been
requiring a more rigorous demonstration of substantial equivalence than in the
past. The FDA sometimes requires the submission of clinical data in order to
make a substantial equivalence determination. It generally takes from four to
12 months from submission to obtain 510(k) premarket clearance, but may take
longer. The FDA may determine that the proposed device is not substantially
equivalent, or that additional data are needed before a substantial
equivalence determination can be made. A "not substantially equivalent"
determination, or a request for additional data, could delay the market
introduction of new products that fall into this category and could have a
material adverse effect on the Company's business, financial condition and
results of operations. In addition, modifications or enhancements to the
Company's products that are cleared through the 510(k) process that could
significantly affect safety or effectiveness of the device or that constitute
a major change in the intended use of the device will require new 510(k)
submissions.

A PMA application must be filed if a proposed device is not substantially
equivalent to a legally marketed class I or class II device, or if it is a
class III device for which the FDA has called for PMAs. Certain class III
devices that were on the market before May 28, 1976 ("preamendments class III
devices"), and devices that are substantially equivalent to them, can be
brought to market through the 510(k) Notification process until the FDA, by
regulation, calls for PMA applications for the devices. In addition to
demonstrating substantial equivalence, 510(k) clearance for such devices
generally requires that the facilities at which they are manufactured
successfully undergo an FDA preapproval GMP inspection. If the FDA calls for a
PMA for a preamendments class III device, a PMA must be submitted for the
device even if the device has already received 510(k) clearance. However, the
FDC Act requires the FDA to either downclassify preamendments class III
devices to class I or class II, or to publish a classification regulation
retaining the devices in class III. If the FDA down-classifies a preamendments
class III device to class I or class II, a PMA application is not required.
Manufacturers of preamendments class III devices that the FDA retains in class
III must have a PMA application accepted for filing by the FDA 90 days after
the publication of a final regulation in which the FDA calls for PMAs.

A PMA application must be supported by valid scientific evidence which
typically includes extensive data, including human clinical trial data to
demonstrate the safety and effectiveness of the device. The PMA application
must also contain the results of all relevant bench tests, laboratory and
animal studies, a complete description of the device and its components, and a
detailed description of the methods, facilities and controls used to
manufacture the device. In addition the submission must include the proposed
labeling, advertising literature, and training methods (if required).

Upon receipt of a PMA application, the FDA makes a threshold determination
as to whether the application is sufficiently complete to permit a substantive
review. Once the submission is accepted for filing, the FDA begins an in-depth
review of the PMA. An FDA review of a PMA application generally takes one to
two years from the date the PMA application is accepted for filing, but may
take significantly longer. The review time is often significantly extended by
the FDA asking for more information or clarification of information already
provided in the submission. During the review period, an advisory committee,
typically a panel of clinicians, will likely be convened to review and
evaluate the application and provide recommendations to the FDA as to whether
the device should be approved. The FDA is not bound by the recommendations of
the advisory panel. Toward the end of the PMA review process, the FDA
generally will conduct an inspection of the manufacturer's facilities to
ensure that the facilities are in compliance with applicable GMP requirements.

If the FDA's evaluations of both the PMA application and the manufacturing
facilities are favorable, the FDA will either issue an approval letter or an
approvable letter, which usually contains a number of conditions which must be
met in order to secure final approval of the PMA. The FDA may also determine
that additional

35
<PAGE>

clinical trials are necessary, in which case PMA approval may be significantly
delayed while additional clinical trials are conducted. The PMA process can be
expensive, uncertain and lengthy and a number of devices for which FDA
approval has been sought by other companies have never been approved for
marketing.

If human clinical trials of a device are required in connection with either
a 510(k) Notification or a PMA, and the device presents a "significant risk,"
the sponsor of the trial (usually the manufacturer or the distributor of the
device) is required to file an investigational device exemption ("IDE")
application prior to commencing human clinical trials. The IDE application
must be supported by data, typically including the result of animal and
laboratory testing. If the IDE application is reviewed and approved by the FDA
and one or more appropriate Institutional Review Boards ("IRBs"), human
clinical trials may begin at a specific number of investigational sites with a
specific number of patients, as approved by the FDA. If the device presents a
"nonsignificant risk" to the patient, a sponsor may begin the clinical trial
after obtaining approval for the study by one or more appropriate IRBs, but
not the FDA. Sponsors of clinical trials are permitted to sell those devices
distributed in the course of the study provided such compensation does not
exceed recovery of the costs of manufacture, research, development and
handling. An IDE supplement must be submitted to and approved by the FDA
before a sponsor or an investigator may make a change to the investigational
plan that may effect the scientific soundness or the rights, safety or welfare
of human subjects.

The Company submitted a 510(k) Notification for the In-Tac Surgical System
for use in bladder neck suspension procedures with women in August 1995. This
submission was subsequently withdrawn due to FDA questions about the surgical
procedure associated with the insertion device. The Company subsequently
modified the surgical procedure to address the FDA questions and submitted a
new 510(k) Notification for the In-Tac Surgical System in June 1996. There can
be no assurance that the Company will obtain 510(k) clearance for the In-Tac
Surgical System in a timely manner, if at all, or that the FDA will not have
additional questions or require the submission of clinical data for the
device. Failure on the part of the Company to obtain 510(k) clearance for the
In-Tac Surgical System could have a material adverse effect on the Company's
business, financial condition, and results of operations.

The Company is currently in the process of developing clinical study
protocols for clinical studies of its In-Flow device in women with atonic
bladder disorder. There can be no assurance that the FDA will not require the
submission of a PMA for the In-Flow device. Moreover, there can be no
assurance that clinical data obtained for the In-Flow device will support the
substantial equivalence or safety and effectiveness of the device. Failure of
the Company to obtain IDE approval for clinical studies of the In-Flow device
or the failure of any data obtained for the device to support the substantial
equivalence or safety and effectiveness of the device could have a material
adverse effect on the Company's business, financial condition, and results of
operations.

In January 1996 the Company submitted a 510(k) Notification for its In-Sure
intraurethral valved catheter. In February 1996, the FDA notified the Company
that the 510(k) Notification was incomplete and that animal and clinical data
would be required for the device.

The Company believes that its other products including the In-Tele, the In-
Probe, the In-Bio and the In-Cuff may be cleared to market through the 510(k)
Notification process. However, there can be no assurance that the FDA will not
require substantial clinical data or the submission of a PMA for any of these
products. Moreover, even if these products can be cleared to market through
the 510(k) Notification process, there can be no assurance that, once 510(k)
Notifications are submitted, 510(k) clearance could be obtained in a timely
manner.

The In-Cuff is a class III preamendments device for which the FDA has
published a proposed rule in the Federal Register calling for the submission
of PMA applications. Before PMA applications must be submitted, however, the
FDA is required to publish a final rule indicating a specific date after which
PMA applications will be required. As a result, if the Company obtains 510(k)
clearance for the In-Cuff prior to the date PMA applications are required, the
Company will be required to have a PMA application accepted for filing by the
FDA within 90 days after the date the FDA calls for PMA applications. There
can be no assurance that the Company would be able to have a PMA application
accepted for filing within the required timeframe or that any data or
information submitted in a PMA application would be adequate to support
approval of the device.

36
<PAGE>

Any products manufactured or distributed by the Company pursuant to FDA
clearances or approvals are subject to pervasive and continuing regulation by
the FDA, including recordkeeping requirements and reporting of adverse
experiences with the use of the device. Device manufacturers are required to
register their establishments and list their devices with the FDA and certain
state agencies, and are subject to periodic inspections by the FDA. The FDC
Act requires devices to be manufactured in accordance with GMP regulations
which impose certain procedural and documentation requirements upon the
Company with respect to manufacturing and quality assurance activities.
Although the Company's facilities and manufacturing procedures are designed to
comply with GMP requirements, there can be no assurance that the FDA would
find them in compliance with all relevant aspects of the GMPs.

Labeling and promotion activities are subject to scrutiny by the FDA and in
certain instances, by the Federal Trade Commission. The FDA actively enforces
regulations prohibiting marketing of products for unapproved uses. The Company
and its products are also subject to a variety of state laws and regulations
in those states or localities where its products are or will be marketed. Any
applicable state or local regulations may hinder the Company's ability to
market its products in those states or localities. Manufacturers are also
subject to numerous federal, state and local laws relating to such matters as
safe working conditions, manufacturing practices, environmental protection,
fire hazard control and disposal of hazardous or potentially hazardous
substances. There can be no assurance that the Company will not be required to
incur significant costs to comply with such laws and regulations now or in the
future or that such laws or regulations will not have a material adverse
effect upon the Company's ability to do business.

The Company also plans to implement design policies and procedures intended
to allow the Company to receive ISO 9001 certification for its manufacturing
facility in Israel. ISO 9001 certification is based on adherence to
established standards in the areas of quality assurance, design and
manufacturing process control. In addition, the European Union (the "EU")
requires that medical devices receive a CE mark by mid-1998 in order to
commercially market and sell medical products in the countries of the European
Economic Area. While the Company intends to satisfy the requisite policies and
procedures that will permit it to receive the CE mark certification for future
products by mid-1998, there is no assurance that it will be successful in
meeting such certification requirements within this time frame or at all.

The Company and its products may also be subject to other Federal, state,
local or foreign regulations relating to health and safety, environmental
matters, quality assurance and the like. The Company's compliance with laws
that regulate the discharge of materials into the environment or otherwise
relate to the protection of the environment does not have a material effect on
the ongoing operations of the Company. The Company has not made any material
expenditures for environmental control facilities, nor does it anticipate any
such expenditures for the remainder of 1996 or in 1997.

The Company's products are subject to continued and pervasive regulation by
the FDA and other foreign and domestic regulatory authorities. Changes in
existing requirements or adoption of new requirements or policies could
adversely affect the ability of the Company to comply with regulatory
requirements. Failure to comply with regulatory requirements could have a
material adverse effect on the Company's business, financial condition and
results of operations. There can be no assurance that the Company will not be
required to incur significant costs to comply with laws and regulations in the
future or that laws or regulations will not have a material adverse effect
upon the Company's business, financial condition or results of operations.

RESEARCH AND DEVELOPMENT

The primary activity of the Company to date has been the research and
development of technology for the diagnosis and treatment of urinary
incontinence. In addition, the Company has identified other potential
applications for its core proprietary technologies. The Company believes that
its future success will depend in

37
<PAGE>

large part upon its ability to enhance its proposed products and to develop
new products. Accordingly, the Company intends to devote significant funds and
efforts to research and development. The Company conducts all of its research
and development activities in Israel. As of June 30, 1996, substantially all
of the employees of the Company were involved in research and development. To
date, the Company has spent approximately $1.5 million on research and
development. See "Use of Proceeds" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations."

COMPETITION

The urological product industry is highly competitive. The Company believes
that the primary competitive factors include the level of physician and
consumer awareness and acceptance of available treatment methods, consistency
of product quality and delivery, price, technical capability and the training
of health care professionals and consumers in the use of available treatment
methods. The Company's ability to compete in this industry will also be
affected by its product development capabilities and innovation, its ability
to obtain required regulatory clearances, its ability to protect the
proprietary technology included in its products, its manufacturing and
marketing capabilities and its ability to attract and retain skilled
employees. Current major competitors who compete in the incontinence market
include Kimberly-Clark Corp., Procter & Gamble Co., Johnson & Johnson, C.R.
Bard Inc., Kendall Co., Mentor Corp. and Baxter Technologies, Inc. Current
major competitors who compete in the market for surgical or implantable
products for incontinence include Boston Scientific Corporation, American
Medical Systems, Inc., C.R. Bard, Inc., Mentor Corp. and Johnson & Johnson.
The Company is aware that UroQuest Medical Corporation, UroHealth Inc., UroMed
Corp. and HK Medical Technologies are developing catheter-based devices for
the treatment of incontinence.

Many of the Company's competitors and potential competitors have
significantly greater financial, manufacturing, marketing, distribution and
technical resources and experience than the Company. It is possible that other
large health care and consumer products companies may enter this industry in
the future. Furthermore, academic institutions, governmental agencies and
other public and private research organizations will continue to conduct
research, seek patent protection and establish arrangements for
commercializing products. Such products may compete directly with any products
which may be offered by the Company. Finally, competitors in the medical
device industry have in the past and may in the future employ litigation to
gain a competitive advantage. See "Risk Factors--Dependence on Patents,
Licenses and Proprietary Technology" and "Risk Factors--Intense Competition
and Risks Associated with Rapid Technological Change."

EMPLOYEES

As of June 30, 1996, the Company employed 28 individuals on a full-time
basis, of which 26 are located at the Company's facility in Israel. The
Company believes that it has been highly successful in attracting experienced
and capable personnel. However, there can be no assurance that the Company
will continue to do so. See "Risk Factors--Dependence Upon Key Personnel."

The Company is not a party to any collective bargaining agreements. However,
the Company's Israeli operations are subject to various Israeli labor laws and
labor practices, and to administrative orders extending certain provisions of
collective bargaining agreements between the Histadrut (Israeli's General
Federation of Labor) and the Coordinating Bureau of Economic Organizations
(the Israeli federation of employers' organizations) to all private sector
employees. For example, mandatory cost of living adjustments, which compensate
Israeli employees for a portion of the increase in the Israeli consumer price
index, are determined on a nationwide basis. Israeli law also requires the
payment of severance benefits upon the termination or death of an employee,
and, in certain circumstances, upon the retirement of an employee. In order to
meet these requirements, the Company contributes on an ongoing basis towards
"managers' insurance" funds that combine pension, insurance and, if
applicable, severance pay benefits. These contributions are expected to cover
a significant portion of the Company's obligations, but certain additional
sums may be payable by law. In addition, Israeli employers and employees are
required to pay specified percentages of wages to the National Insurance
Institute, which is similar to the United States Social Security
Administration. Other provisions of Israeli law or regulation govern matters
such as the length of the workday, minimum wages, other terms of employment
and restrictions on discrimination.

38
<PAGE>

FACILITIES

The Company maintains its principal executive office in San Francisco,
California, pursuant to a lease expiring in June 1998. The Company currently
leases approximately 8,000 square feet in Ramat Gan, Israel, pursuant to a
lease expiring in March 1998. The Israeli facility is dedicated to research
and development, manufacturing and administration. The manufacturing space is
adequate to support production for the Company's ongoing clinical trials and
the Company's planned commercialization of only certain of its products. The
FDA regulates facilities that manufacture medical devices intended for sale in
the U.S. During the investigational device trial phase, the Company is exempt
from these formal requirements. See "Risk Factors--Limited Manufacturing
Experience."

PRODUCT LIABILITY AND WARRANTIES

The testing, marketing and sale of medical devices entails a risk of product
liability claims by consumers and others. The Company maintains product
liability insurance with an aggregate coverage limit of $5 million. The
Company expects to review the adequacy of such coverage from time to time.
There can be no assurance that the Company will be able to secure or maintain
product liability insurance in such amounts that management believes to be
reasonably sufficient to cover foreseeable product liability claims.

LEGAL PROCEEDINGS

The Company is not a party to any material legal proceedings, nor is the
property of the Company the subject of any such proceedings.

SCIENTIFIC ADVISORY COMMITTEE

The Company has established a Scientific Advisory Committee consisting of
experts in the field of urology or gynecology which will review clinical
studies and recommend product development strategies. Certain members of the
Scientific Advisory Committee listed below have received options to purchase
shares of Common Stock in connection with previous services to the Company.
Members of the Scientific Advisory Committee will be reimbursed for their out-
of-pocket expenses and will be paid $1,000 for each meeting they attend.

<TABLE>
<CAPTION>
NAME AFFILIATION
---- -----------
<C> <S>
David Barrett, M.D. Professor of Urology, Mayo Graduate School of
Medicine; Chairman, Department of Urology, Mayo
Clinic, Rochester, Minnesota
Jerry Blaivas, M.D. Clinical Professor of Urology, Cornell University
Medical School
Peggy Norton, M.D. Assistant Professor, Department of Obstetrics and
Gynecology, University of Utah Medical Center
Shlomo Raz, M.D. Professor of Urology, University of California at
Los Angeles Medical Center
Stewart Stanton, M.B.B.S. Director of the Urogynecology Unit and Co-Director
of the Pelvic Floor Reconstruction Centre, St.
George's Hospital in London, England
Alan Wein, M.D. Professor and Chair of the Urology Department,
University of Pennsylvania Medical School; Chief of
Urology, Hospital of the University of Pennsylvania
</TABLE>

39
<PAGE>

MANAGEMENT

DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES

The directors, executive officers and key employees of Influence, Inc. and
IMT, the Company's Israeli subsidiary, are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<C> <C> <S>
Peter A. Bick, M.D.(1) 42 Chief Executive Officer, President and
Director
Mordechay Beyar, M.D.(2) 40 General Manager of IMT and Vice Chairman of
the Board of Directors
Oren Globerman(1) 36 General Manager of IMT and Vice Chairman of
the Board of Directors
Ze'ev Sohn, Ph.D. 35 Vice President, Research of IMT
Michael Arad 49 Vice President, Manufacturing of IMT
Mark D. Kramer 35 Vice President, Regulatory Affairs
Lewis C. Pell(2) 52 Chairman of the Board of Directors
Shimon Eckhouse, Ph.D.(1)(2) 51 Director
</TABLE>
- --------
(1) Member of Audit Committee
(2) Member of Compensation Committee

DR. BICK has been Chief Executive Officer and President since May 1996, and
a director since July 1996. From June 1994 to February 1996 he was a general
partner of Sequoia Capital, a venture capital firm. Prior to his employment at
Sequoia, Dr. Bick was a general partner at Burr, Egan, Deleage & Co., a
venture capital firm, beginning in January 1993. Previously, Dr. Bick was
President of Quintiles, Inc., a contract research organization, which he
joined in 1990. Dr. Bick is a physician and Board Certified psychiatrist who
trained at Harvard Medical School. He holds an M.B., B.S. from the Royal Free
Hospital School of Medicine at the University of London and an M.B.A. from
Columbia University.

DR. BEYAR is a founder of Influence and has served as a director since its
inception in November 1994. Dr. Beyar also serves as a General Manager of the
Company's Israeli subsidiary. In addition to his work for the Company, from
1994 to the present, Dr. Beyar has served part-time as a practicing urologist
at B'nai Zion Hospital in Haifa, Israel. He holds numerous patents in the
field of medical devices. Dr. Beyar was a founder of InStent Inc., a developer
of medical stents, in 1991 and served as a director of InStent Inc. until its
acquisition by Medtronic, Inc. From 1991 to the present, Dr. Beyar has also
served as a consultant to the Israeli subsidiary of InStent. Dr. Beyar
received an M.D. from Tel Aviv University Medical School.

MR. GLOBERMAN is a founder of Influence and has served as a director since
its inception in November 1994. He also serves as a General Manager of the
Company's Israeli subsidiary. Mr. Globerman has also served as the General
Manager for the Israeli subsidiary of InStent since that company's founding in
April 1991. Mr. Globerman holds a B.Sc. in Engineering from Tel Aviv
University.

DR. SOHN has been Vice-President, Research of IMT since January 1995. Prior
to joining Influence, Dr. Sohn was a research and development engineer for
Orbotech, Ltd., an Israeli technology company, from December 1993 to December
1994. From January 1991 to December 1993, Dr. Sohn was an engineer at Israel
Aircraft Industries, an aerospace manufacturer. Dr. Sohn holds a Ph.D. in
mechanical engineering from Columbia University.

MR. ARAD has been Vice President, Manufacturing of IMT since March 1995.
From 1988 to 1995, Mr. Arad was Chief Engineer and Manager of Quality
Assurance at Dan Sprinklers, Ltd. in Israel, and previously was a Group Leader
in the Research and Development Department of BMY, Inc., a subsidiary of
Harsco Corp., a defense products manufacturer. Mr. Arad holds a B.Sc. in
Mechanical Engineering from the Technion-Israel Institute of Technology.

40
<PAGE>

MR. KRAMER has been Vice President, Regulatory Affairs, since August 1996.
Prior to joining Influence, from June 1995 to July 1996 Mr. Kramer worked at
C.L. McIntosh and Associates, Inc., a medical and regulatory affairs
consulting firm. From August 1990 to June 1995 Mr. Kramer was Chief of the
Urology and Lithotripsy Devices Branch of the FDA. Since August 1996, Mr.
Kramer has also served part time as Vice President of Regulatory Affairs of
EDAP Technomed Group USA, a medical device manufacturer. Mr. Kramer holds an
M.S. in Biomedical Engineering from the Rensselear Polytechnic Institute.

MR. PELL is a founder of Influence and has served as Chairman of the Board
since its inception in November 1994. In 1991, Mr. Pell co-founded InStent,
and served as its Chairman until InStent was acquired by Medtronic, Inc. in
June 1996. Mr. Pell was a director of Heart Technology Inc. from April 1989
until it was acquired by Boston Scientific Corp. in December 1995. Since May
1992 Mr. Pell has served as Vice Chairman and a director of Vision Sciences
Inc., a publicly-held medical device company. Mr. Pell is a founder or co-
founder of a number of other privately-held medical device and biotechnology
companies.

DR. ECKHOUSE has been a director of Influence since July 1996. Since April
1992, Dr. Eckhouse has served as Chief Executive Officer and a Director of ESC
Medical Systems Ltd., an Israeli company which develops and manufactures
medical equipment. From 1986 to 1991, he was the manager of the advanced
product development department of Maxwell Laboratories Inc. Dr. Eckhouse holds
a doctorate in physics from the University of California at Irvine.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Board of Directors has established a Compensation Committee which
consists of Mr. Pell, Dr. Beyar and Dr. Eckhouse. The Compensation Committee
makes recommendations concerning the salaries and incentive compensation of
employees of the Company, and oversees the 1995 Stock Option Plan. Mr. Pell
and Dr. Beyar also served on the Compensation and Stock Option Committee of
InStent until its acquisition by Medtronic, Inc.

The Board of Directors has established an audit committee to oversee the
auditing of the Company's books of account and financial statements. The Audit
Committee consists of Mr. Globerman, Dr. Eckhouse and Dr. Bick.

COMPENSATION OF DIRECTORS

Directors currently receive no cash fees for services provided in that
capacity but may be reimbursed for out-of-pocket expenses they incur in
connection with their attendance at meetings of the Board of Directors.

EXECUTIVE COMPENSATION

The following table sets forth certain information for the year ended December
31, 1995 with respect to the annual and long-term compensation of the
Company's Chief Executive Officer and each executive officer whose annual
salary and bonus exceeded $100,000 (collectively, the "Named Executive
Officers"):

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL COMPENSATION
--------------------------
OTHER ANNUAL
NAME AND PRINCIPAL POSITION YEAR SALARY COMPENSATION
- ---------------------------- ---- -------- ------------
<S> <C> <C> <C>
Peter A. Bick, M.D.
President and Chief Executive Officer(1)............ 1995 -- --
Andrew M. Smith
Vice President and Chief Operating Officer(2)....... 1995 $150,000 --
</TABLE>
- --------
(1) Dr. Bick joined the Company as President and Chief Executive Officer on
May 31, 1996, and was granted options to purchase 190,000 shares of Common
Stock at an exercise price of $5.00 per share, 85,000 of which vested
immediately and the remainder of which vest in equal installments on May
31, 1997, 1998 and 1999. See "Management--Employment Agreements."
(2) Mr. Smith resigned as an officer and director of the Company on May 15,
1996.

41
<PAGE>

EMPLOYMENT AGREEMENTS

Under the terms of an employment agreement dated May 31, 1996 between the
Company and Dr. Bick, Dr. Bick will receive a salary of $150,000 per annum,
plus a performance bonus to be determined by the Board of Directors. In
addition, Dr. Bick has been granted options to purchase 190,000 shares of
Common Stock at an exercise price of $5.00 per share, of which 85,000 vested
immediately and the remainder of which vests in equal installments on May 31,
1997, 1998 and 1999. If Dr. Bick is terminated without cause, his salary and
health benefits will be paid for six months and the next succeeding vesting
date of his stock options will be accelerated to the date of the termination.
Upon a change in control of the Company, any stock options not yet vested
will, under certain circumstances immediately vest.

Each of Mr. Globerman and Dr. Beyar have entered into agreements with the
Company pursuant to which each will receive an annual salary of $150,000 and
each will devote such time to the Company as is necessary for the management
of the business and affairs of the Company. Such salary will be in lieu of any
further payments to NMB Medical Applications Ltd., a research and development
company controlled by Mr. Globerman and Dr. Beyar, which were made at the rate
of $7,000 per month prior to July 1, 1996.

Under the terms of an employment agreement dated August 1, 1996, between the
Company and Mark Kramer, Mr. Kramer will receive a base salary of from $75,000
to $90,000 per annum based on his time commitment to the performance of his
duties to the Company of from between 50% to 60% of his business time. In
addition, for each of the Company's products approved or cleared by the FDA,
Mr. Kramer will be eligible to receive a $50,000 bonus. Mr. Kramer will be
granted incentive stock options to purchase 25,000 shares of Common Stock at
the time and at an exercise price equal to the initial public offering price
of this Offering. Twenty-five percent of such options vest upon consummation
of the Offering, with the remainder vesting in equal amounts on each
anniversary of Mr. Kramer's employment. Upon a change in control of the
Company, Mr. Kramer's stock options not yet vested will vest immediately and
he will be permitted to terminate his employment upon 60 days written notice
and continue to receive his salary and benefits for six months thereafter.

STOCK OPTION PLANS

The Company has reserved a total of 450,000 shares of Common Stock for
issuance pursuant to stock option plans, of which 421,750 are reserved under
the Company's existing stock option plan (the "1995 Stock Option Plan") and an
additional 28,250 shares are reserved for issuance pursuant to a future option
plan. As of the date of this Prospectus, the Company has granted to employees
and to certain individuals who provided valuable services to the Company
options to purchase an aggregate of 391,750 shares of Common Stock at an
exercise price of $5.00 per share under the 1995 Stock Option Plan. Of these,
options to purchase 202,818 shares are exercisable immediately. The remaining
options are exercisable from 1997 through 2000. See "Shares Eligible for
Future Sale."

The 1995 Plan is administered by the Compensation Committee of the Board of
Directors. Subject to the provisions of the 1995 Plan, the Compensation
Committee has the authority to select the optionees or stock recipients and
determine the terms of the options or restricted stock granted, including (i)
the number of shares, (ii) option exercise terms, (iii) the exercise or
purchase price, (iv) the duration of the option and (v) the time, manner and
form of payment for restricted stock and upon exercise of an option. An option
is not transferable by the optionholder except by will or by the laws of
descent and distribution, or, in the case of nonqualified options only,
pursuant to a valid domestic relations order.

42
<PAGE>

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information as of June 30, 1996, and
as adjusted to reflect the sale by the Company of the Common Stock being
offered hereby, with respect to beneficial ownership of Common Stock by: (i)
each person who is known by the Company to be the beneficial owner of more
than 5% of Influence's outstanding shares of Common Stock; (ii) each of the
Company's executive officers; (iii) each of the Company's directors; and (iv)
all directors and executive officers of the Company as a group. Except where
otherwise indicated, Influence believes, based on information furnished by
such owners, that the beneficial owners of the Shares listed below have sole
investment and voting power with respect to such shares.

<TABLE>
<CAPTION>
PERCENT OF TOTAL(1)
--------------------------------
SHARES
BENEFICIALLY
NAME AND ADDRESS(2) OWNED PRIOR TO OFFERING AFTER OFFERING
------------------- ------------ ----------------- --------------
<S> <C> <C> <C>
Oren Globerman(3)................ 828,000 17.82% %
Mordechay Beyar, M.D.(4)......... 671,500 14.45% %
Lewis C. Pell(5)................. 529,000 11.38% %
Katsumi Oneda(6)................. 503,500 10.83% %
Ze'ev Sohn....................... 282,750 6.08% %
Peter A. Bick, M.D.(7)........... 85,000 1.80% %
Mark Kramer(8)................... 6,250 * %
All directors and executive offi-
cers
as a group (6 persons)(9)....... 2,402,500 51.69% %
</TABLE>

- --------
*Less than 1%.

(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission, based on factors including voting and
investment power with respect to Shares. Applicable percentage ownership
is based on 4,647,750 Shares outstanding as of June 30, 1996 (assuming the
conversion of Series A Preferred Stock) and Shares outstanding after
the Offering. Shares of Common Stock subject to the options currently
exercisable, or exercisable within 60 days after June 30, 1996, are deemed
outstanding for computing the percentage ownership of the person holding
such options, but are not deemed outstanding for computing the percentage
ownership of any other person.
(2) Unless otherwise indicated, the address of each person named in this table
is care of Lewis C. Pell, 40 Ramland Road South, Suite 18, Orangeburg, New
York 10962.
(3) Mr. Globerman owns all of such shares through Globerman Engineering Ltd.,
a company organized under the laws of the State of Israel, of which Mr.
Globerman and his brother are the sole shareholders. Does not include
100,000 shares of Common Stock owned by Benjamin Globerman, Mr.
Globerman's brother, and 10,000 shares of Common Stock owned by Arie
Spectorovsky, Mr. Globerman's cousin, beneficial ownership of all such
shares being disclaimed by Mr. Globerman.
(4) Dr. Beyar owns all of such shares through UroTek Ltd., a company organized
under the laws of the State of Israel, of which Dr. Beyar and his wife are
the sole shareholders. Does not include 200,000 shares of Common Stock
beneficially owned by Raphael Beyer, Dr. Beyar's brother, 10,000 shares of
Common Stock owned by Foster Padway, Dr. Beyar's brother-in-law, and
10,000 shares of Common Stock owned by Meyer Bachar, Dr. Beyar's cousin,
beneficial ownership of all such shares being disclaimed by Dr. Beyar.
(5) Does not include 5,000 shares of Common Stock held by Aron Pell, Mr.
Pell's brother, 10,000 shares of Common Stock held by Norman Pell, Mr.
Pell's father, 100,000 shares of Common Stock held by Jessica H. Pell, Mr.
Pell's daughter and 100,000 shares of Common Stock held by Phyllis L.
Pell, Mr. Pell's wife as custodian for Candice Pell, their daughter,
beneficial ownership of all such shares being disclaimed by Lewis C. Pell.
(6) Does not include 100,000 Shares held by Hidetoshi Oneda and 100,000 Shares
held by Nami Oneda, Mr. Oneda's son and daughter, respectively. Mr.
Oneda's address is: 40 Ramland Road South, Orangeburg, New York 10962.
(7) Consists of options to purchase 85,000 shares of Common Stock exercisable
within 60 days of June 30, 1996. Dr. Bick's address is care of the Company
at 601 Montgomery Street, Suite 845, San Francisco, California 94111.
(8) Consists of options to purchase 6,250 shares of Common Stock which will be
issued and vest upon completion of the Offering. Mr. Kramer's address is
care of the Company at 601 Montgomery Street, Suite 845, San Francisco,
California 94111.
(9) Includes options held by Dr. Bick and Mr. Kramer, as described in the
preceding footnotes.

43
<PAGE>

CERTAIN TRANSACTIONS

In connection with the founding of the Company, NMB Medical Applications
Ltd. ("NMB"), a company controlled by Oren Globerman and Dr. Mordechay Beyar,
transferred certain of the Company's core technology to the Company in
exchange for $300,000. In March 1995, the Company paid NMB $26,500 to
reimburse NMB for development expenditures related to additional technology
transferred to the Company. During 1995, the Company purchased equipment from
NMB for $25,000. From March, 1995 until June 30, 1996, Influence paid NMB a
consulting fee of $7,000 per month principally for the services of Dr. Beyar
and Mr. Globerman, who received no direct compensation from the Company.

During 1995, the Company sold an aggregate of 713,000 shares of Series A
Preferred Stock to investors at a purchase price of $5.00 per share. Each
share of Series A Preferred Stock is convertible into one share of Common
Stock and has a liquidation value of $5.00 per share. The Board of Directors
has approved and the Company is seeking stockholder approval of an amendment
to the Series A Preferred Stock to provide for the automatic conversion of the
Series A Preferred Stock prior to completion of this Offering.

On September 20, 1995, the Company repurchased 40,000 shares of Common Stock
at a price of $5.00 per share from each of Mordechay Beyar, Oren Globerman and
Ze'ev Sohn.

In November, 1995 Yozma Venture Capital Ltd. ("Yozma") acquired 160,000
shares of Series A Preferred Stock, and entered into an agreement (the "Yozma
Agreement") between Influence, IMT and Yozma, conferring certain rights and
obligations upon the parties. In particular, the Yozma Agreement obligates
Influence to provide certain minimum funding to IMT, its subsidiary, and to
give IMT exclusive manufacturing and marketing rights for the Company's
products to be sold outside of North America. The Company has requested that
Yozma agree to terminate the Yozma Agreement upon completion of the Offering.

Pursuant to an agreement (the "In-Probe Agreement") between Jerry G.
Blaivas, M.D. and the Company, Dr. Blaivas licensed to IMT his rights in
technology related to In-Probe. The In-Probe Agreement contemplates that the
Company will develop a prototype of the In-Probe by the end of 1996. In
countries where the Company has not engaged a distributor, Dr. Blaivas will
have the right to sell the In-Probe in that country. A 3% royalty on In-Probe
sales is payable to Dr. Blaivas. Dr. Mordechay Beyar, who also developed the
In-Probe technology, has assigned his interest in the technology to IMT. Dr.
Blaivas and the Company have agreed in principle that Dr. Blaivas will assign
all his rights in the In-Probe and to terminate the In-Probe Agreement in
exchange for(i) options to purchase 10,000 shares of Common Stock at the
initial public offering price and (ii) upon commercial sales of In-Probe in
the U.S. or in two countries in Europe, options to purchase 10,000 shares of
Common Stock at the then prevailing market price of the Company's shares.

Mr. Lewis C. Pell, the Chairman of the Board of Directors of Influence, made
loans to Influence on June 10 and August 14, 1996, in the aggregate amount of
$2 million. Interest accrues daily on outstanding balances at the federal
short-term rate, and interest and principal are payable within two years of
issuance.

For a description of certain employment agreements, see "Management--
Employment Agreements."

44
<PAGE>

DESCRIPTION OF CAPITAL STOCK

The authorized capital stock of Influence will consist of 30,000,000 shares
of Common Stock, $0.001 par value per share, and 850,000 shares of Preferred
Stock, $0.01 par value per share, upon the filing of the Company's Second
Amended and Restated Certificate of Incorporation prior to the closing of this
Offering. Prior to this Offering, there were outstanding an aggregate of
3,934,750 shares of Common Stock and 713,000 shares of Series A Preferred
Stock which will convert on a 1-for-1 basis to shares of Common Stock prior to
the closing of this Offering.

The following summary of certain provisions of the Common Stock and
Preferred Stock does not purport to be complete and is subject to, and
qualified in its entirety by, the provisions of Influence, Inc.'s Second
Amended and Restated Certificate of Incorporation which will be filed prior to
the closing of this Offering (the "Certificate") which is included as an
exhibit to the Registration Statement, and by the provisions of applicable
law.

COMMON STOCK

Holders of Common Stock are entitled to one vote per share on all matters to
be voted on by stockholders. Voting rights are not cumulative, with the result
that holders of more than 50% of the shares of Common Stock are able to elect
all of the Directors. Holders of Common Stock are entitled to receive
dividends, when, as and if declared by the Board of Directors in its
discretion out of funds legally available therefor. See "Dividend Policy." The
holders of Common Stock are entitled to receive on a pro rata basis all assets
remaining for distribution to stockholders, subject to the rights of any
Preferred Stock outstanding, upon liquidation or dissolution of the Company.
The Common Stock does not have preemptive or other subscription rights, any
conversion rights or any redemption or sinking fund provisions. The
outstanding shares of Common Stock are, and the shares of Common Stock offered
hereby will be when sold, validly issued, fully paid and nonassessable.

PREFERRED STOCK

Upon the closing of this Offering, the Board of Directors will have the
authority to issue 850,000 shares of Preferred Stock in one or more series and
to fix the relative rights, preferences, privileges, qualifications,
limitations and restrictions thereof, including dividend rights, dividend
rates, conversion rights, voting rights, terms of redemption, redemption
prices, liquidation preferences and the number of shares constituting any
series or the designation of such series, without further vote or action by
the stockholders. The Board of Directors could, without the approval of the
stockholders, issue Preferred Stock having voting or conversion rights that
could adversely affect the voting power of the holders of Common Stock, and
the issuance of Preferred Stock could be used, under certain circumstances, to
render more difficult or discourage a hostile takeover of the Company. The
Company has no present plans to issue any shares of Preferred Stock.

LIMITATION OF LIABILITY

The Certificate contains provisions which stipulate that a director will not
be personally liable for monetary damages to the Company or its shareholders
which result from breaches of a director's fiduciary duty other than liability
for breaches of the duty of loyalty, acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, violations
under Section 174 of the Delaware General Corporation Law or for any
transaction from which the director derived improper personal benefit.
Further, the Certificate provides generally for indemnification of the
directors and officers of the Company to the fullest extent permitted under
Delaware law, and permits indemnification for all other persons whom the
Company is permitted to indemnify. Management believes that such provisions
are necessary to attract and retain qualified directors and officers.

45
<PAGE>

CERTAIN STATUTORY PROVISIONS

In addition to the directors' ability to issue shares of Preferred Stock in
one or more series, certain provisions of Delaware law are commonly considered
to have an anti-takeover effect. The Company is subject to the provisions of
Section 203 of the Delaware General Corporation Law. In general, the statute
prohibits a publicly held Delaware corporation from engaging in a "business
combination" (which includes a wide range of transactions) with an "interested
stockholder" (a stockholder who has acquired more than 15% but less than 85%
of the outstanding voting shares of a corporation which is subject to the
statute) for a period of three years subsequent to the date on which the
stockholder became an "interested stockholder." The prohibition does not apply
if (1) prior to the completion of the three year period, the corporation's
Board of Directors approved the transaction through which the stockholder
became an "interested stockholder" or (2) the "business combination" is
approved by the corporation's Board of Directors and is authorized by a vote
of at least two-thirds of the outstanding stock of the corporation not owned
by the "interested stockholder."

A Delaware corporation may "opt out" of the Anti-Takeover Law with an
express provision either in its original certificate of incorporation or in
its certificate of incorporation or by-laws resulting from a stockholders'
amendment approved by at least a majority of the outstanding voting shares.
The Company is a Delaware corporation that is subject to the Anti-Takeover Law
and has not "opted out" of its provisions.

The foregoing provisions of Delaware law and the Company's Certificate and
Bylaws could have the effects of discouraging others from attempting hostile
takeovers of the Company and, as a consequence, they may also inhibit
temporary fluctuations in the market price of the Common Stock that might
result from actual or rumored hostile takeover attempts. Such provisions may
also have the effect of preventing changes in the management of the Company.
It is possible that such provisions could make it more difficult to accomplish
transactions which stockholders may otherwise deem to be in their best
interests.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock will be the American
Stock Transfer & Trust Company.

46
<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

Prior to the Offering, there has been no public market for the Common Stock,
and no prediction can be made as to the effect, if any, that the sale of
shares or the availability of shares for sale will have on the market price of
the Common Stock prevailing from time to time. Nevertheless, sales of
substantial amounts of Common Stock in the public market could adversely
affect prevailing market prices and the ability of the Company to raise equity
capital in the future. See "Underwriting."

Upon consummation of the Offering, shares of Common Stock will be
outstanding (assuming no exercise of the Underwriters' over-allotment option).
The shares of Common Stock sold in this Offering will be freely tradable
within the public market without restriction or further registration under the
Securities Act, except for any shares purchased by "affiliates" of the
Company, as that term is defined in Rule 144 ("Rule 144") promulgated under
the Securities Act. The remaining outstanding shares of Common Stock are
deemed to be "restricted securities" within the meaning of Rule 144 and may be
publicly resold only if registered under the Securities Act or sold in
accordance with an eligible exemption from registration, such as Rule 144.

The Company, its executive officers and directors and certain stockholders
of Influence, Inc. holding an aggregate of shares have agreed that, for a
period of 180 days after the date of this Prospectus, they will not, directly
or indirectly, offer, sell, contract to sell, grant any option to sell or
otherwise dispose of, directly or indirectly, any shares of Common Stock or
securities convertible into or exchangeable for, or any rights to purchase or
acquire, Common Stock, without the prior written consent of Montgomery
Securities. Montgomery Securities, in its sole discretion and at any time
without notice, may release all or any portion of the securities subject to
the 180-day lock-up agreement.

There are currently outstanding options to purchase 391,750 shares of Common
Stock, all of which will be subject to restriction on transfer for at least
180 days from the date of this Prospectus. The Company may in the future cause
the shares issuable pursuant to stock options granted to employees and
directors of the Company to be registered under the Securities Act. See
"Management--Stock Option Plans."

Upon expiration of the 180-day lock-up agreements, approximately
additional shares of Common Stock will become eligible for public resale,
subject in some cases to volume limitations pursuant to Rule 144. The
remaining approximately shares held by existing stockholders will become
eligible for public resale at various times over a period of less than two
years following the completion of this offering, subject in some cases to
vesting provisions and volume limitations.

In general, under Rule 144, as currently in effect, a person (including an
"affiliate," as that term is defined below) who has been deemed to have
beneficially owned restricted securities (as defined in Rule 144) for at least
two years from the date such restricted securities were acquired from
Influence or an affiliate, is entitled to sell, within any three-month period,
a number of shares that does not exceed the greater of one percent of the then
outstanding number of shares of Influence or the average weekly trading volume
of the Shares on the Nasdaq National Market during the four calendar weeks
preceding the date on which notice of such sale was filed under Rule 144. A
person (or persons whose shares are required to be aggregated) who is not
deemed an "affiliate" of Influence and who has beneficially owned shares for
at least three years, is entitled to sell such shares under Rule 144 without
regard to the volume limitations described above. Affiliates continue to be
subject to such limitations. As defined in Rule 144, an "affiliate" of an
issuer is a person that directly, or indirectly through one or more
intermediaries, controls or is controlled by, or is under common control with,
such issuer. Sales under Rule 144 are also subject to certain provisions
relating to the manner of sale, notice of sale and the availability of current
public information about the Company. The Securities and Exchange Commission
has proposed an amendment to Rule 144 which would reduce the holding period
required for shares subject to Rule 144 to become eligible for sale in the
public market. If the proposed amendment becomes effective, the two-year and
three-year holding periods referred to in this paragraph will be reduced to
one-year and two-year holding periods, respectively, which will have a
material effect on the times when shares of Common Stock become eligible for
resale.

47
<PAGE>

ISRAELI TAXATION AND INVESTMENT PROGRAMS

The following is a summary of the current tax structure applicable to
companies in Israel, with special reference to its effect on the Company, and
certain Israeli Government programs benefitting the Company. The following
also contains a discussion of certain Israeli tax consequences to persons
purchasing the Shares offered hereby. To the extent that the discussion is
based on new tax legislation which has not been subject to judicial or
administrative interpretation, there can be no assurance that the views
expressed in the discussions will be accepted by the taxing authorities in
question. In addition, reductions have been proposed in certain Government
benefit programs discussed herein, and there can be no assurance that such
benefits will continue at their current levels, or at all. The discussion
should not be construed as legal or professional tax advice and is not
exhaustive of all possible tax considerations.

GENERAL ISRAELI CORPORATE TAX STRUCTURE

Income of the Company's Israeli subsidiary will be subject to Israeli tax.
The corporate tax rate in Israel is 36%. Nevertheless, the effective tax rate
payable by a company which derives income from an "Approved Enterprise" may be
considerably less. The Company has filed an application for "Approved
Enterprise" status for its plant in Israel. There can be no assurance that
such application will be granted. See "Law for the Encouragement of Capital
Investments, 1959" below.

LAW FOR THE ENCOURAGEMENT OF CAPITAL INVESTMENTS, 1959

General

The Law for the Encouragement of Capital Investments, 1959 (the "Investment
Law") provides that capital investments in a production facility (or other
eligible assets) may, upon application to the Israel Investment Center, be
designated as an "Approved Enterprise." Each certificate of approval for an
Approved Enterprise relates to a specific investment program in the Approved
Enterprise, delineated both by the financial scope of the investment and by
the physical characteristics of the facility or the asset. The tax benefits
derived from any such certificate of approval relate only to taxable profits
attributable to the specific Approved Enterprise. An Approved Enterprise is
entitled to certain benefits, including Israeli Government cash grants, State-
guaranteed loans and tax benefits. The Company has filed an application for
"Approved Enterprise" status for its plant in Israel. There can be no
assurance that such application will be granted.

Tax Benefits

Taxable income derived from an Approved Enterprise is subject to a reduced
Corporate Tax rate of 25%. Such income is eligible for further reductions in
tax rates depending on the percentage of the foreign investment in the
company's share capital (conferring rights to profits, voting and appointment
of directors) and of its combined share and loan capital which is owned by
non-Israeli residents. The tax rate is 20% if the foreign investment is 49% or
more but less than 74%, 15% if the foreign investment is 74% or more but less
than 90%; and 10% if the foreign investment is 90% or more. These tax benefits
are granted for a limited period not exceeding 7 years or 10 years (for
companies which are at least 25% foreign owned) from the first year in which
the Approved Enterprise has taxable income. For companies, such as the
Company's Israeli subsidiary, whose foreign shareholding exceeds 25%, Approved
Enterprises would create entitlement to reduced tax rates for a period not to
exceed 10 tax years rather than the maximum seven tax years applicable to
companies without foreign investment. However, there can be no assurance that
the Company will have any Approved Enterprises or that the provision of the
law will not change.

A company that has an Approved Enterprise status which was approved after
April 1, 1986 may elect to receive grants under the Investment Law or, in lieu
of such grants, to participate in an alternative benefits program (the
"Alternative Benefits Program"), under which the undistributed income from the
Approved

48
<PAGE>

Enterprise is fully exempt from Corporate Tax for a defined period of time.
The period of tax exemption ranges between two and ten years, depending upon
the location within Israel of the Approved Enterprise and the type of the
Approved Enterprise. On expiration of the exemption period, the Approved
Enterprise would be eligible for beneficial tax rates under the Investment Law
for the remainder, if any, of the otherwise applicable benefits period. The
Company has elected in its application for "Approved Enterprise" status to
participate in the Alternative Benefits Program. If the Company's application
is approved, the Company expects to be entitled to a two year tax holiday
followed by eight years of reduced tax.

A company that has elected to participate in the Alternative Benefits
Program and that subsequently pays a dividend out of the income derived from
the Approved Enterprise during the tax exemption period will be subject to
Corporate Tax in respect of the amount distributed (including the tax thereon)
at the rate that would have been applicable had the company not elected the
Alternative Benefits Program (generally 25%). The dividend recipient is taxed
at the reduced rate of 15% applicable to dividends from Approved Enterprises
if the dividend is distributed within twelve years after the tax exemption
period. In the case of a company with over 25% foreign shareholding (as
defined by law), the twelve-year limitation on reduced withholding tax on
dividends does not apply. This tax may be withheld by the company at source,
regardless of whether the dividend is converted into foreign currency. See "--
Capital Gain and Income Taxes Applicable to Non-Israeli Shareholders."

Other Benefits

An Approved Enterprise is also entitled to two other incentives from the
Israeli Government, whether or not the Alternative Benefits Program is
elected. These include accelerated depreciation on property and equipment,
generally ranging from 200% (in respect of equipment) to 400% (in respect of
buildings) of the ordinary depreciation rates (and not special depreciation
rates, see "Law of Encouragement of Industry (Taxes), 1969") during the first
five tax years of the operation of these assets, subject to a ceiling of 20%
per year with respect to depreciation on buildings.

The benefits available to an Approved Enterprise are conditional upon the
fulfillment of certain conditions stipulated in the Investment Law and its
regulations and the criteria set forth in the certificate of approval. In the
event that these conditions are violated, in whole or in part, the Company's
Israeli subsidiary would be required to refund the amount of benefits, with
the addition of the Israeli CPI linkage differences and interest.

If only a part of a company's taxable income is derived from an Approved
Enterprise or if the company operates under more than one approval, its
effective corporate tax rate is a weighted combination of the various
applicable rates.

LAW FOR THE ENCOURAGEMENT OF INDUSTRY (TAXES), 1969

Under the Law for the Encouragement of Industry (Taxes), 1969 (the "Industry
Encouragement Law"), a company qualifies as an "Industrial Company" if it is
resident in Israel and at least 90% of its income in a given tax year
(exclusive of income from certain specified sources) is derived from
Industrial Enterprises owned by that company. An "Industrial Enterprise" is
defined as an enterprise whose principal activity in a particular tax year is
industrial manufacturing.

Pursuant to the Industry Encouragement Law, an Industrial Company is
entitled, among other things, to deduct the purchase price of patents or
certain other intangible property rights (other than goodwill) over a period
of eight years beginning with the year in which such rights were first used.

Under certain income tax regulations, special depreciation rates have been
determined for machinery, equipment and buildings used by an Industrial
Enterprise. These rates differ based on factors including the date of
commencement of operation and the number of work shifts. An Industrial Company
owning an Approved Enterprise may choose between the above depreciation rates
and the depreciation rates available to Approved Enterprises.

49
<PAGE>

Qualification as an Industrial Company under the Industry Encouragement Law
is not conditioned upon the receipt of prior approval from any Israeli
Government authority. No assurance can be given that the Company's Israeli
subsidiary will qualify as an Industrial Company or will in the future be able
to avail itself of any benefits available to companies so qualifying.

TAXATION UNDER INFLATIONARY CONDITIONS

The Income Tax (Inflationary Adjustments) Law, 1985 (the "Inflationary
Adjustments Law") attempts to overcome some of the problems presented to a
traditional tax system by an economy experiencing rapid inflation, which was
the case in Israel at the time the law was enacted. Generally, the
Inflationary Adjustments Law provides significant tax deductions and
adjustments to depreciation methods and tax loss carry forwards to compensate
for loss of value resulting from an inflationary economy. The Company's
Israeli subsidiary's taxable income is determined under this law.

The Israeli Income Tax Ordinance and the Inflationary Adjustments Law allow
"Foreign-Invested Companies," which maintain their accounts in dollars in
compliance with regulations published by the Israeli Minister of Finance, to
base their tax returns on the operating results as reflected in the dollar
financial statements or to adjust their tax returns based on exchange rate
changes rather than changes in the Israeli CPI (in lieu of the principles set
forth by the Inflationary Adjustments Law). For these purposes, a Foreign-
Invested Company is a company, like the Company's subsidiary, more than 25% of
whose share capital (in terms of rights to profits, voting and appointment of
directors) and of whose combined share and loan capital is held by persons who
are not residents of Israel. From inception the Company's Israeli subsidiary
has measured its results for tax purposes on the basis of the changes in the
Israeli CPI.

TAX BENEFITS AND GOVERNMENT SUPPORT FOR RESEARCH AND DEVELOPMENT

Israeli tax law permits, under certain conditions, a tax deduction in the
year incurred for expenditures (including capital expenditures) in scientific
research and developments projects, if the expenditures are approved by the
relevant Israeli Government Ministry (determined by the field of research),
and the research and development is for the promotion of the enterprise and is
carried out by or on behalf of a company seeking such deduction. Expenditures
not so approved are deductible over a three-year period.

Under the Law for the Encouragement of Industrial Research and Development,
1984 (the "Research Law") research and development programs approved by a
research committee are eligible for grants or loans upon meeting certain
criteria against payment of royalties from the sale of the product developed
in accordance with the program. Regulations promulgated under the Research Law
generally provide for the payment of royalties to the Office of the Chief
Scientist ranging from 2% to 3% on sales of products developed as a result of
a research project so funded until a percentage (ranging from 100% to 150%) of
the dollar-linked grant is repaid. The Research Law requires that the
manufacture of any product developed as a result of research and development
funded by the Israeli Government take place in Israel. Under recently enacted
regulations, if the Chief Scientist permits the manufacture of any such
product outside of Israel, the royalty rates and the repayment ceiling
increase substantially. The Research Law also provides that know-how from the
research and development which is used to produce the project may not be
transferred to third parties without the approval of a research committee.
Such approval is not required for the export of any products resulting from
such research or development.

The Company has never applied for any grants from the Office of the Chief
Scientist.

CAPITAL GAIN AND INCOME TAXES APPLICABLE TO NON-ISRAELI SHAREHOLDERS

Israeli law generally imposes a capital gains tax on the sale of securities
and any other capital asset. The basic tax rate applicable to corporations is
36%. Since 1994, the maximum tax rate for individuals has been 50%. These
rates are subject to the provisions of any applicable bilateral double
taxation treaty. The Convention between the Government of the State of Israel
and the Government of the United States of America With Respect to Taxes on
Income (the "Treaty") governs double taxation between the United States and
Israel.

50
<PAGE>

Under the Treaty, dividends of an Israeli company derived from the income of
an Approved Enterprise will be subject to a 15% dividend withholding tax. The
Treaty further provides that a 12.5% Israeli dividend withholding tax would
apply to dividends paid to a U.S. corporation owning 10% or more of an Israeli
company's voting stock for, in general, the current and preceding income years
of the Israeli company. The lower 12.5% rate applies only on dividends from
income not derived from an Approved Enterprise in the applicable period and
does not apply if the Company has certain amounts of passive income.

Pursuant to the Treaty, the sale, exchange or disposition of shares by a
person who qualifies as a resident of the United States within the meaning of
the Treaty and who is entitled to claim the benefits afforded to such
residents under the Treaty ("Treaty U.S. Resident") will not be subject to the
Israeli capital gains tax unless such Treaty U.S. Resident holds, directly or
indirectly, shares representing 10% or more of the voting power of such
company during any part of the 12-month period preceding such sale, exchange
or disposition. A sale, exchange or disposition of Shares by a Treaty U.S.
Resident who holds, directly or indirectly, shares representing 10% or more of
the voting power of a company at any time during such preceding 12-month
period would be subject to such Israeli tax. However, under the Treaty, such
Treaty U.S. Resident would be permitted to claim a credit for such taxes
against the U.S. income tax imposed on any gain from such sale, exchange or
disposition, subject to the limitations applicable to foreign tax credits.

51
<PAGE>

UNITED STATES FEDERAL INCOME TAXATION

The following general discussion sets forth the material United States
federal income tax consequences that are applicable to persons purchasing the
Shares offered hereby. The discussion should not be construed as legal or
professional advice and is not exhaustive of all possible tax considerations
that may be relevant to a decision whether to invest in the Shares. The
precise tax consequences of an investment in the Shares will vary depending on
an investor's particular position. In particular, taxes may be imposed on
certain investors in the Shares by jurisdictions other than the United States
and Israel (including states and localities of the United States), and certain
investors may be subject to special taxes in connection with this investment
in the Shares (including United States federal alternative minimum taxes).

The summary of United States income tax laws set out below is based on the
Internal Revenue Code of 1986, as amended, Treasury regulations, judicial
decisions, published positions of the Internal Revenue Service and the Treaty
as of the date hereof and is subject to any changes occurring after that date.
Prospective investors are urged to consult with their own tax advisors before
making an investment in Shares.

IN GENERAL

The Company will be subject to United States federal income tax at rates
applicable to regular corporations (currently ranging up to 35%). If the
Company receives distributions from IMT, the Company will be entitled, subject
to certain limitations, to a credit for Israeli taxes imposed on the Company
and withheld with respect to such distributions, and may also be entitled in
certain circumstances to a credit for Israeli income taxes paid by IMT. In
certain circumstances, the combined Israeli and United States tax burden on
the Company may exceed the maximum United States tax rates described below.

PERSONAL HOLDING COMPANY

If more than 50% of the Company's stock is owned directly, indirectly or by
application of certain attribution rules, by five or fewer individuals
(including certain tax-exempt corporations, certain trusts, and residents and
citizens of the United States or another country) at any time during the last
half of the Company's taxable year, and at least 60% of the Company's adjusted
ordinary gross income for the taxable year is personal holding company income,
the Company will be subject to United States personal holding company tax, in
addition to its regular income tax, at a current rate of 39.6% on its
undistributed personal holding company income for the taxable year.

For this purpose, the "personal holding company income" of a corporation is
the portion of the corporation's adjusted ordinary gross income that consists
of certain types of passive income, including certain dividends, interest,
annuities, rents and royalties (even if the rents and royalties are derived
from the active conduct of a trade or business). The "undistributed personal
holding company income" of a corporation is based on its net taxable income
(which excludes, for example, income exempt from regular federal income tax),
adjusted to reflect (among other things) deductions for federal income taxes
and dividends to shareholders paid by the Company.

The Company believes that it currently qualifies as a personal holding
company. It is unclear, however, whether the Company will be a personal
holding company after the Offering and no assurance can be given that it will
not be.

FOREIGN PERSONAL HOLDING COMPANY

A foreign corporation (such as IMT) is treated as a foreign personal holding
company (a "FPHC") if more than 50% of its stock is owned directly, indirectly
(such as through the Company) or by application of certain attribution rules,
by five or fewer individuals who are United States citizens or residents and
at least 60% (50%, in certain circumstances) of its gross income is foreign
personal holding company income. Each direct United

52
<PAGE>

States stockholder of a FPHC (including the Company, if IMT is a FPHC) is
generally required to include in its income as a dividend an amount equal to
its pro rata share of the FPHC's undistributed foreign personal holding
company income for the year. This amount is subject to United States income
tax (without any credit for foreign taxes paid for the FPHC) and, if the
stockholder is a personal holding company, personal holding company tax. If a
corporation ceases to satisfy the FPHC stock ownership test on a date prior to
the end of a taxable year due to changes in its stock ownership, its direct
United States stockholders are required to include only a proportion of its
undistributed foreign personal holding company income for the year, based on
the period prior to such date.

For this purpose, a corporation's "foreign personal holding company income"
and "undistributed foreign personal holding company income" are, with certain
exceptions, generally determined in the same manner as the corporation's
personal holding company income and undistributed personal holding company
income, respectively, except that such amounts are not limited to United
States source income.

Based on the current ownership of the Company, the Company is not presently
a FPHC and does not expect to become a FPHC after the Offering.

CONTROLLED FOREIGN CORPORATION

IMT will be a controlled foreign corporation (a "CFC") for United States
federal income tax purposes. As a result, the Company will be required to
include in its income its pro rata share of IMT's subpart F income, and may
also be required to include certain additional amounts if IMT has investments
in United States property or, under current law, passive assets in excess of
certain levels. For this purpose "subpart F income" includes certain income
derived from transactions with related parties and certain types of passive
income such as dividends, interest, rents, royalties, and annuities, but does
not include, among other things, rents and royalties derived from transactions
with unrelated parties in the active conduct of a trade or business.

The Company does not currently expect that IMT will have any material amount
of subpart F income, or any material investments in United States property or
any passive assets materially in excess of the prescribed levels. However, no
assurance can be given in this regard.

PASSIVE FOREIGN INVESTMENT COMPANY

A foreign corporation is treated as a passive foreign investment company (a
"PFIC") if 75% or more of its income is passive income, or the average
percentage of its assets (based upon the adjusted basis of such assets) which
produces passive income or are held for the production of passive income is at
least 50%. For this purpose passive income generally includes dividends,
interest, rents, royalties, and annuities, but does not include, among other
things, rents and royalties derived from transactions with unrelated parties
in the active conduct of a trade or business.

Each United States shareholder of a PFIC is required to pay, in addition to
regular federal income tax, a deferred tax amount if the shareholder disposes
of any stock in the PFIC or receives an excess distribution from the PFIC. For
this purpose, a distribution is an "excess distribution" to the extent that
it, combined with other distributions received in the same taxable year,
exceeds 125% of the average amount received by the shareholder during the
three preceding taxable years (or, if shorter, the period for which the
shareholder has held the stock).

If a United States shareholder of a PFIC makes an election, the PFIC will be
treated as a qualified electing fund (a "QEF") with respect to the
shareholder. In that case, the deferred tax amount will not be required to be
paid by the shareholder, but the shareholder will be required to include in
income its pro rata share of the QEF's earnings and profits for the year.

The Company believes that IMT will not be a PFIC at the time of the
Offering, and, in view of the anticipated composition of IMT's assets and
income, the Company does not currently expect that IMT will become a PFIC
following the Offering. However, no assurance can be given in this regard.

53
<PAGE>

UNDERWRITING

The Underwriters named below, represented by Montgomery Securities, UBS
Securities LLC and Volpe, Welty & Company (the "Representatives"), have
severally agreed, subject to the terms and conditions set forth in the
Underwriting Agreement, to purchase from the Company the number of shares of
Common Stock indicated below opposite their respective names at the initial
public offering price less the underwriting discount set forth on the cover
page of this Prospectus. The Underwriting Agreement provides that the
obligations of the Underwriters are subject to certain conditions precedent,
and that the Underwriters are committed to purchase all of the shares if they
purchase any.

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
----------- ---------
<S> <C>
Montgomery Securities..............................................
UBS Securities LLC. ...............................................
Volpe, Welty & Company.............................................
Total............................................................
====
</TABLE>

The Representatives have advised the Company that the Underwriters propose
initially to offer the Common Stock to the public on the terms set forth on
the cover page of this Prospectus. The Underwriters may allow to selected
dealers a concession of not more than $ per share; and the Underwriters may
allow, and such dealers may reallow, a concession of not more than $ per
share to certain other dealers. After the Offering, the offering price and
other selling terms may be changed by the Representatives. The Common Stock is
offered subject to receipt and acceptance by the Underwriters, and to certain
other conditions, including the right to reject orders in whole or in part.

The Company has granted an option to the Underwriters, exercisable during
the 30-day period after the date of this Prospectus, to purchase up to a
maximum of additional shares of Common Stock to cover over-allotments, if
any, at the same price per share as the initial shares to be purchased by the
Underwriters. To the extent that the Underwriters exercise this option, the
Underwriters will be committed, subject to certain conditions, to purchase
such additional shares in approximately the same proportion as set forth in
the above table. The Underwriters may purchase such shares only to cover over-
allotments made in connection with the Offering.

The Underwriting Agreement provides that the Company will indemnify the
Underwriters against certain liabilities, including civil liabilities under
the Securities Act, or will contribute to payments the Underwriters may be
required to make in respect thereof.

The Company, its directors and executive officers and certain other
stockholders of the Company have agreed that for a period of 180 days after
the date of this Prospectus, they will not, directly or indirectly, offer,
sell, contract to sell, grant any option to sell or otherwise dispose of,
directly or indirectly, any shares of Common Stock or securities convertible
into or exchangeable for, or any rights to purchase or acquire, Common Stock
without the prior written consent of Montgomery Securities. Montgomery
Securities may, in its sole discretion and at any time without prior notice,
release all or any portion of the shares of Common Stock subject to the lock-
up agreements.

The Representatives have informed the Company that the Underwriters do not
expect to make sales of Common Stock offered by this Prospectus to accounts
over which they exercise discretionary authority in excess of 5% of the
Offering.

54
<PAGE>

In 1995, certain employees of Montgomery Securities, UBS Securities LLC and
Volpe, Welty and Company acquired an aggregate of 2,000, 21,000 and 1,000
shares of Common Stock, respectively, for $5.00 per share.

Prior to the Offering, there has been no public market for the Common Stock.
Consequently, the initial public offering price will be determined by
negotiations between the Company and the Representatives. Among the factors to
be considered in such negotiations will be the history of, and the prospects
for, the Company and the industry in which it competes, an assessment of the
Company's management, the Company's past and present operations, the prospects
for future earnings of the Company, the present state of the Company's
development, the general condition of the securities markets at the time of
the Offering and the market price of and demand for publicly-traded common
stocks of comparable companies in recent periods. The estimated initial public
offering price range set forth on the cover page of this Prospectus is subject
to change as a result of market conditions and other factors.

The Company will apply to have the Common Stock listed on the Nasdaq
National Market under the symbol "INFL".

LEGAL MATTERS

The validity of the Shares offered hereby will be passed upon for the
Company by Arnold & Porter, New York, New York, and for the Underwriters by
Testa, Hurwitz & Thibeault, LLP, Boston, Massachusetts.

EXPERTS

The balance sheets as of December 31, 1994 and 1995 and the statements of
operations, stockholders' (deficit) equity and cash flows for the year ended
December 31, 1995 and for the periods from November 9, 1994 (inception) to
December 31, 1994 and November 9, 1994 (inception) to December 31, 1995, have
been included herein in reliance on the report of Coopers & Lybrand L.L.P.,
independent accountants, given on the authority of that firm as experts in
accounting and auditing.

Certain of the statements in this Prospectus under the captions "Risk
Factors--Dependence Upon Patents, Licenses and Proprietary Technology" and
"Business--Patents, Licenses and Proprietary Rights" have been reviewed and
approved by Levisohn, Lerner, Berger & Langsam, New York, New York, patent
counsel to the Company, as experts on such matters, and are included herein in
reliance upon that review and approval. Andrew S. Langsam, a member of
Levisohn, Lerner, Berger & Langsam, owns 1,800 shares of Series A Preferred
Stock which will, upon completion of the Offering, convert into the same
number of shares of Common Stock.

AVAILABLE INFORMATION

Influence has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 under the Securities Act
with respect to the Shares being offered hereby. This Prospectus, which
constitutes part of the Registration Statement, does not contain all the
information set forth in the Registration Statement and the exhibits and
schedules filed therewith. For further information with respect to Influence
and the Shares being offered, reference is hereby made to such Registration
Statement and to the exhibits and schedules filed therewith. Statements
contained in this Prospectus regarding the contents of any agreement are not
necessarily complete, and in each instance reference is made to the copy of
such agreement filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference. As a result of
the Offering, Influence will become subject to the informational requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
in accordance therewith will be required to file periodic reports and other
information with the Commission, subject to certain exceptions described
below. The Registration Statement, including the exhibits and schedules
thereto, may be inspected without charge at the principal office of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, or at the Regional
Offices of the Commission: Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661; and 7 World Trade Center, Suite 1300, New York,
New York 10048. Copies of such material can also

55
<PAGE>

be obtained at prescribed rates from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission
maintains a Web site (http://www.sec.gov) that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission. In addition, application will be made to
have the Shares listed for quotation on the Nasdaq National Market and, if
accepted for quotation, the Registration Statement, including exhibits
thereto, and reports and other information concerning Influence may be
inspected and copied at the offices of the National Association of Securities
Dealers, Inc., 9513 Key West Avenue, Rockville, Maryland 20850.

56
<PAGE>

INFLUENCE, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)

INDEX

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants......................................... F-2
Consolidated Financial Statements:
Consolidated Balance Sheets as of December 31, 1994 and 1995 and (unau-
dited) as of
June 30, 1996........................................................... F-3
Consolidated Statements of Operations for the period from November 9,
1994 (inception) to December 31, 1994, for the year ended December 31,
1995, for the period from November 9, 1994 (inception) to December 31,
1995, for the six months ended June, 1995 (unaudited) and 1996
(unaudited) and for the period from November 9, 1994 (inception) to June
30, 1996 (unaudited).................................................... F-4
Consolidated Statements of Stockholders' (Deficit) Equity for the period
from November 9, 1994 (inception) to December 31, 1995, including the
period from November 9, 1994 (inception) to December 31, 1994 and the
year ended December 31, 1995, and for the six months ended June 30, 1996
(unaudited)............................................................. F-5
Consolidated Statements of Cash Flows for the period from November 9,
1994 (inception) to December 31, 1994, the year ended December 31, 1995,
for the period from November 9, 1994 (inception) to December 31, 1995,
and for the six months ended June 30, 1995 (unaudited) and 1996
(unaudited) and for the period from November 9, 1994 (inception) to June
30, 1996 (unaudited).................................................... F-6
Consolidated Notes to Financial Statements............................... F-7
</TABLE>

F-1
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of
Influence, Inc.:

We have audited the accompanying balance sheets of INFLUENCE, INC. AND
SUBSIDIARY (a development stage enterprise) as of December 31, 1995 and 1994,
and the related statements of operations, stockholders' (deficit) equity and
cash flows for the year ended December 31, 1995 and for the periods from
November 9, 1994 (inception) to December 31, 1994 and November 9, 1994
(inception) to December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Influence, Inc. and
Subsidiary as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for the year ended December 31, 1995 and for
the periods from November 9, 1994 (inception) to December 31, 1994 and
November 9, 1994 (inception) to December 31, 1995, in conformity with
generally accepted accounting principles.

Coopers & Lybrand L.L.P.

New York, New York
August 15, 1996.

F-2
<PAGE>

INFLUENCE, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
--------------------- 1996
<S> <C> <C> -----------
ASSETS: 1994 1995
--------- ----------
(UNAUDITED)
Current assets:
Cash and cash equivalents............. $1,375,262 $ 826,368
Taxes receivable...................... 61,360 128,423
Other current assets.................. 55,034 132,507
---------- -----------
Total current assets............... 1,491,656 1,087,298
Fixed assets, at cost, net of accumu- 135,246 407,093
lated depreciation and amortization... --------- ---------- -----------
Total assets....................... $ -- $1,626,902 $1,494,391
========= ========== ===========
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
EQUITY:
Current liabilities:
Accounts payable and accrued expenses. $ 160,000 $ 467,463 $ 623,176
Bank overdraft........................ 136,470 12,360 --
--------- ---------- -----------
Total current liabilities.......... 296,470 479,823 623,176
--------- ---------- -----------
Note payable to stockholder............ 1,000,000
-----------
Commitments and contingencies
Stockholders' (deficit) equity:
Series A preferred stock, $.01 par
value; 750,000 shares authorized;
713,000 shares issued and outstanding
at December 31, 1995 and June 30,
1996 ($3,565,000 liquidation value).. 7,130 7,130
Common Stock, $.001 par value;
4,800,000 shares authorized;
4,054,750, 3,934,750 and 3,934,750
shares issued and outstanding at
December 31, 1994, December 31, 1995
and June 30, 1996, respectively...... 4,055 3,935 3,935
Additional paid-in capital............ 3,133,510 3,593,510
Unearned compensation................. (271,233)
Stock subscriptions receivable........ (525)
Deficit accumulated during the devel- (300,000) (1,997,496) (3,462,127)
opment stage......................... --------- ---------- -----------
Total stockholders' (deficit) equi- (296,470) 1,147,079 (128,785)
ty................................ --------- ---------- -----------
Total liabilities and stockholders' $ -- $1,626,902 $1,494,391
(deficit) equity.................. ========= ========== ===========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-3
<PAGE>

INFLUENCE, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
NOVEMBER 9, 1994 NOVEMBER 9, 1994 SIX MONTHS ENDED NOVEMBER 9, 1994
(INCEPTION) YEAR ENDED (INCEPTION) JUNE 30, (INCEPTION)
THROUGH DECEMBER 31, THROUGH ----------------------- THROUGH
DECEMBER 31, 1994 1995 DECEMBER 31, 1995 1995 1996 JUNE 30, 1996
----------------- ------------ ----------------- ----------- ----------- ----------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Expenses:
Research and develop-
ment................... $ 771,326 $ 771,326 $ 291,547 $ 775,419 $ 1,546,745
Patent and licensing.... $ 300,000 478,870 778,870 36,949 57,158 836,028
General and administra- 459,271 459,271 190,435 635,584 1,094,855
tive................... --------- ----------- ----------- --------- ----------- -----------
Total expenses......... 300,000 1,709,467 2,009,467 518,931 1,468,161 3,477,628
Other income:
Interest................ 11,971 11,971 3,530 15,501
--------- ----------- ----------- --------- ----------- -----------
Net loss............... $(300,000) $(1,697,496) $(1,997,496) $(518,931) $(1,464,631) $(3,462,127)
========= =========== =========== ========= =========== ===========
Pro forma per share data
computed in accordance
with Securities and Ex-
change Commission Staff
Accounting Bulletin No.
64:
Net loss per $ $
share(unaudited)...... =========== ===========
Weighted average number
of shares
outstanding(unaudited). =========== ===========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-4
<PAGE>

INFLUENCE, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY

For the period from November 9, 1994
(inception) to December 31, 1995,
including the period from November 9,
1994 (inception) to December 31, 1994
and for the year ended December 31,
1995, and unaudited for the six months
ended June 30, 1996

<TABLE>
<CAPTION>
SERIES A DEFICIT
PREFERRED ACCUMULATED
STOCK COMMON STOCK ADDITIONAL STOCK DURING THE
-------------- ----------------- PAID-IN UNEARNED SUBSCRIPTIONS DEVELOPMENT
SHARES AMOUNT SHARES AMOUNT CAPITAL COMPENSATION RECEIVABLE STAGE TOTAL
------- ------ --------- ------ ---------- ------------ ------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Common shares issued for
cash of $.001 per
share.................. 3,530,000 $3,530 $ 3,530
Common shares issued but
not paid for........... 524,750 525 $ (525)
Net loss for the period
from November 9, 1994
(inception) to December $ (300,000) (300,000)
31, 1994............... --------- ------ ------- ----------- ----------
Balance at December
31, 1994............ 4,054,750 4,055 (525) (300,000) (296,470)
Sale of Series A pre-
ferred stock for cash
of $5.00 per share..... 713,000 $7,130 $3,557,870 3,565,000
Cash received for common
shares
previously issued,
$.001 per share........ 525 525
Issuance of stock op-
tions in connection
with services rendered. 175,520 175,520
Acquisition and retire-
ment of treasury stock
for cash of $5.00 per
share.................. (120,000) (120) (599,880) (600,000)
Net loss for the year
ended December 31, (1,697,496) (1,697,496)
1995................... ------- ------ --------- ------ ---------- ------- ----------- ----------
Balance at December
31, 1995............ 713,000 7,130 3,934,750 3,935 3,133,510 -- (1,997,496) 1,147,079
Issuance of options in
connection with serv-
ices to be rendered
(unaudited)............ 460,000 $(460,000)
Amortization of unearned
compensation (unau-
dited)................. 188,767 188,767
Net loss for six months
ended June 30, 1996 (1,464,631) (1,464,631)
(unaudited) ------- ------ --------- ------ ---------- --------- ------- ----------- ----------
Balance at June 30,
1996 713,000 $7,130 3,934,750 $3,935 $3,593,510 $(271,233) $ -- $(3,462,127) $ (128,785)
(unaudited)......... ======= ====== ========= ====== ========== ========= ======= =========== ==========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-5
<PAGE>

INFLUENCE, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
SIX MONTHS ENDED
NOVEMBER 9, 1994 YEAR ENDED NOVEMBER 9, 1994 JUNE 30, NOVEMBER 9, 1994
(INCEPTION) THROUGH DECEMBER 31, (INCEPTION) THROUGH ----------------------- (INCEPTION) THROUGH
DECEMBER 31, 1994 1995 DECEMBER 31, 1995 1995 1996 JUNE 30, 1996
------------------- ------------ ------------------- ----------- ----------- -------------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Cash flows from operat-
ing activies:
Net loss during devel-
opment stage.......... $(300,000) $(1,697,496) $(1,997,496) $(518,931) $(1,464,631) $(3,462,127)
Adjustments to recon-
cile net loss to net
cash used in
operating activities:
Depreciation and amor-
tization............. 10,297 10,297 5,654 11,657 21,954
Amortization of un-
earned compensation.. 188,767 188,767
Stock options issued
in consideration for
services
rendered............. 175,520 175,520 78,720 175,520
Changes in assets and
liabilities:
(Increase) decrease
in taxes receivable
and other current
assets.............. (116,394) (116,394) (107,000) (144,536) (260,930)
Increase in accounts
payable and accrued 160,000 307,463 467,463 303,523 155,713 623,176
expenses............ --------- ----------- ----------- --------- ----------- -----------
Net cash used in op- (140,000) (1,320,610) (1,460,610) (238,034) (1,253,030) (2,713,640)
erating activities.. --------- ----------- ----------- --------- ----------- -----------
Cash flows from invest-
ing activites:
Capital expenditures... (145,543) (145,543) (70,600) (283,504) (429,047)
--------- ----------- ----------- --------- ----------- -----------
Net cash used in in- (145,543) (145,543) (70,600) (283,504) (429,047)
vesting activities.. --------- ----------- ----------- --------- ----------- -----------
Cash flows from financ-
ing activities:
Proceeds from issuance
of common stock....... 3,530 525 4,055 525 4,055
Proceeds from issuance
of Series A preferred
stock................. 3,565,000 3,565,000 1,050,000 3,565,000
Increase (decrease) in
bank overdraft........ 136,470 (124,110) 12,360 (136,470) (12,360)
Payments to acquire
treasury shares....... (600,000) (600,000) (600,000)
Proceeds from note pay- 1,000,000 1,000,000
able to stockholder... --------- ----------- ----------- --------- ----------- -----------
Net cash provided by
financing activi- 140,000 2,841,415 2,981,415 914,055 987,640 3,969,055
ties................ --------- ----------- ----------- --------- ----------- -----------
Net increase (de-
crease) in cash and
cash equivalents.... -- 1,375,262 1,375,262 605,421 (548,894) 826,368
Cash and cash equiva-
lents at beginning of -- -- -- 1,375,262
period................. --------- ----------- ----------- --------- ----------- -----------
Cash and cash equiv-
alents at end of pe- $ -- $ 1,375,262 $ 1,375,262 $ 605,421 $ 826,368 $ 826,368
riod................ --------- ----------- ----------- --------- ----------- -----------
Supplemental disclosure
of noncash financing
and
investment activities: --------- ----------- ----------- --------- ----------- -----------
Common stock issued $ 525 $ 525 $ 525
and not paid for.... --------- ----------- ----------- --------- ----------- -----------
Common stock re- $ 600,000 $ 600,000 $ 600,000
tired............... --------- ----------- ----------- --------- ----------- -----------
Issuance of stock
options in consider- $ 175,520 $ 175,520 $ 78,720 $ 460,000 $ 635,520
ation for services.. --------- ----------- ----------- --------- ----------- -----------
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-6
<PAGE>

INFLUENCE, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Interim data is unaudited)
1.ORGANIZATION AND NATURE OF BUSINESS

Influence, Inc., a Delaware Corporation, was incorporated on November 9,
1994. Its wholly owned subsidiary, Influence Medical Technologies, Ltd.
("IMT"), an Israeli Corporation was formed on January 1, 1995. Influence,
Inc. and its wholly owned subsidiary (the "Company") are engaged in the
development, manufacturing and marketing of products to treat urinary
incontinence, atonic bladder disorder, and other urological disorders. The
Company has no products approved by the United States Food and Drug
Administration or comparable agencies in other countries and as a
development stage enterprise, the Company's primary efforts to date have
been devoted to research and development, raising capital, acquiring
equipment and setting up laboratories. In addition to the other risks
associated with a new business venture, there can be no assurance that the
Company's research and development will be successfully completed, that any
products developed will obtain necessary government regulatory approval or
that any approved products will be commercially viable. In addition, the
Company operates in an environment of rapid change in technology and is
dependent upon the continued services of its current employees, consultants
and subcontractors. The Company's product development facility is located
in the State of Israel and accordingly the Company is directly affected by
political, economic and military conditions within Israel. As of December
31, 1995, total assets of the Israeli subsidiary amounted to approximately
$247,000. Such amount consisted primarily of other current assets and fixed
assets.

The Company has sustained net losses and negative cash flows from
operations since its inception and expects these conditions to continue for
the foreseeable future. The Company has received a commitment from certain
stockholders that they will provide the financing necessary to enable the
Company to continue to operate through the earlier of December 31, 1997 or
until alternative financing, as defined, can be obtained. In the event the
Company is unsuccessful in obtaining alternative financing, the Company
will need to raise additional financing after December 31, 1997 through
public or private equity financing, collaborative or other arrangements
with corporate sources, or other sources of financing to fund operations.
Even if alternative financing is available, there is no assurance that the
Company will not need to raise additional capital. There can be no
assurance that such additional financing, if available, can be obtained on
terms reasonable to the Company. In the event the Company is unable to
raise necessary capital, operations will need to be scaled back or
discontinued.

2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of Influence
Inc. and its wholly owned subsidiary. All intercompany accounts and
transactions have been eliminated in consolidation.

FOREIGN CURRENCY TRANSLATION

The Company's subsidiary considers its functional currency to be the U.S.
dollar. Gains and losses from foreign currency translations are included in
determining the net loss in the period in which the exchange rate changes.
Such gains and losses were not material.

FIXED ASSETS

Leasehold improvements, furniture and equipment are stated at cost.
Furniture, and equipment are depreciated on a straight-line basis over
their estimated useful lives of five years. Leasehold improvements are
amortized on a straight-line basis over the life of the lease or of the
improvement, whichever is shorter.

F-7
<PAGE>

INFLUENCE, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
(Interim data is unaudited)
PATENTS

As a result of research and development efforts conducted by the Company,
it has applied, or is applying, for a number of patents to protect
proprietary inventions. All costs associated with patents are expensed as
incurred.

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments which have maturities
of three months or less, when acquired, to be cash equivalents. The
carrying amount reported in the balance sheet for cash and cash equivalents
approximates its fair value. Cash and cash equivalents, subject the Company
to concentrations of credit risk.

NET LOSS PER SHARE

(A) PRO FORMA PER SHARE DATA IN ACCORDANCE WITH SECURITIES AND EXCHANGE
COMMISSION STAFF ACCOUNTING BULLETIN NO. 64 (UNAUDITED)

The pro forma per share data included in the Statements of Operations
has been computed using the weighted average number of shares of common
stock outstanding. Common stock issuable upon the exercise of
outstanding stock options and the conversion of convertible preferred
stock are excluded from the computation as their effect is anti-
dilutive, except that, pursuant to Securities and Exchange Commission
Staff Accounting Bulletin No. 64, options and convertible preferred
stock, issued at prices below the assumed public offering price during
the 12-month period prior to the proposed offering have been included
in the calculation (using the treasury stock method) as if they were
outstanding for all periods presented.

(B)PER SHARE DATA IN ACCORDANCE WITH ACCOUNTING PRINCIPLES BOARD OPINION
NO. 15

The per share data found below has been computed in accordance with
Accounting Principles Board Opinion No. 15. Such computation is based
on the weighted average number of shares outstanding excluding the
number of common shares issuable upon the exercise of outstanding
options and the conversion of preferred stock since such inclusion
would be anti-dilutive.

<TABLE>
<CAPTION>
FOR THE SIX MONTHS
NOVEMBER 9, 1994 YEAR ENDED ENDED JUNE 30,
(INCEPTION) THROUGH DECEMBER 31, -----------------------
DECEMBER 31, 1994 1995 1995 1996
------------------- ------------ ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Net loss per share...... $ (0.07) $ (0.42) $ (0.13) $ (0.37)
========= ========= ========= =========
Shares used in
calculation of net loss 4,054,750 4,021,216 4,054,750 3,934,750
per share............. ========= ========= ========= =========
</TABLE>

INCOME TAXES

The Company accounts for income taxes in accordance with the provisions
of Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes" ("SFAS 109"). SFAS 109 requires that the Company recognize
deferred tax liabilities and assets for the expected future tax
consequences of events that have been included in the financial statements
or tax returns. Under this method, deferred tax liabilities and assets are
determined on the basis of the difference between the tax basis of assets
and liabilities and their respective financial reporting amounts
("temporary differences") at enacted tax rates in effect for the years in
which the differences are expected to reverse.

F-8
<PAGE>

INFLUENCE, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
(Interim data is unaudited)
USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from those estimates.

IMPACT OF THE ADOPTION OF RECENTLY ISSUED ACCOUNTING STANDARD

The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation"
("SFAS 123") in October 1995. SFAS 123 requires companies to estimate the
fair value of common stock, stock options, or other equity instruments
("Equity Instrument") issued to employees using pricing models which take
into account various factors, such as the current price of the common
stock, volatility, and the expected life of the Equity Instrument. SFAS 123
permits companies to elect either to provide pro forma note disclosure or
adjust operating results for the amortization of the estimated value of the
Equity Instrument as compensation expense over the vesting period of the
Equity Instrument. The Company has elected to provide pro forma note
disclosure which will appear in its annual financial statements for the
year ending December 31, 1996. The adoption of SFAS 123 will have no effect
on the Company's financial position or results of operations.

3.FIXED ASSETS

Property and equipment consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1995 1996
------------ -----------
(UNAUDITED)
<S> <C> <C>
Furniture........................................... $ 34,866 $ 61,650
Equipment........................................... 108,000 357,844
Leasehold improvements.............................. 2,677 9,553
-------- --------
145,543 429,047
Less, Accumulated depreciation and amortization..... 10,297 21,954
-------- --------
$135,246 $407,093
======== ========
</TABLE>

4.ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, JUNE 30,
1994 1995 1996
------------ ------------ -----------
(UNAUDITED)
<S> <C> <C> <C>
Accounts payable....................... $160,000 $366,832 $518,197
Legal and accounting fees.............. 19,263 10,000
Accrued payroll........................ 50,750 64,943
Payroll taxes payable.................. 18,122 23,040
Other.................................. 12,496 6,996
-------- -------- --------
$160,000 $467,463 $623,176
======== ======== ========
</TABLE>

F-9
<PAGE>

INFLUENCE, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
(Interim data is unaudited)

5.COMMITMENTS

(A) OPERATING LEASES:

The Company leases office and laboratory space in Israel under two
noncancelable operating leases. One lease expires during August 1996
and the other lease commenced in March 1996 and expires in March 1998.

Future minimum rental payments under these operating leases are as
follows:

<TABLE>
<CAPTION>
MINIMUM
YEAR ENDING ANNUAL
DECEMBER 31, RENTALS
------------ -------
<S> <C>
1996..................................................................... $51,000
1997..................................................................... 36,000
1998..................................................................... 9,000
-------
$96,000
=======
</TABLE>

Rent expense totaled approximately $34,000 for both the year ended
December 31, 1995, and the period from November 9, 1994 (inception) to
December 31, 1995.

(B)LICENSE AGREEMENT:

The Company entered into an exclusive worldwide license agreement with
Dimotech Ltd to develop, manufacture and market products utilizing
certain technology. The terms of the license agreement are for a period
coterminous with the life of the underlying patent for the technology
which expires during 2012. As consideration for the license, the
Company agreed to prepay $50,000 of royalties upon the execution of the
agreement and $350,000 payable upon the earlier of December 31, 1996 or
the completion of an initial public offering of the Company's common
stock. Royalties will be based upon .5% of total income derived from
direct or indirect use of the patent.

During the year ended December 31, 1995, the Company recognized an
expense of $400,000 related to this agreement and at December 31, 1995,
$300,000 was included in accounts payable.

6.STOCKHOLDERS' EQUITY

COMMON STOCK:

On September 20, 1995, the Company acquired 120,000 shares of common
stock from three founders for $600,000 in cash. Concurrently, the Company
retired those shares.

SERIES A PREFERRED STOCK:

Throughout calendar year 1995, the Company sold a total of 713,000 shares
of Series A preferred stock ("preferred stock") to founders and outside
investors for $5.00 per share. Total cash consideration from the sale of
preferred stock was $3,565,000. The preferred stock is convertible at any
time at the option of the holder on a one-for-one basis into common stock.
The preferred stock has a liquidation preference of $5.00 per share, as
defined. Preferred stockholders have no voting or preferential dividend
rights. With regards to the sale of 160,000 shares of preferred stock, the
Company entered into an agreement with one investor which provides the
Company with an option to acquire these shares at a price per share, as
defined.

F-10
<PAGE>

INFLUENCE, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
(Interim data is unaudited)

STOCK OPTION PLAN:

During 1995, the Company's Board of Directors (the "Board") authorized
450,000 shares of common stock to be issued to employees, directors and
other individuals who render services to the Company. In connection
therewith, the Company adopted the 1995 Stock Option Plan (the "1995
Plan"). Under the 1995 Plan, a maximum of 421,750 shares of the Company's
common stock, adjusted for stock splits, stock dividends, and other capital
adjustments, as defined, are available for stock option and restricted
stock awards. Under the 1995 Plan, the Board may award options and
restricted stock to employees, directors who are not employees and other
individuals who render services to the Company. Options granted under the
1995 Plan terminate ten years after the date of grant. During 1995, 65,750
and 96,000 options were granted to employees and consultants, respectively,
at an exercise price of $5.00 per share. Each option entitles the holder to
purchase one share of the Company's common stock. These options vest over
various periods none in excess of four years. In connection with the
options issued to consultants, the Company recognized a noncash expense of
$175,520 for the year ended December 31, 1995. As of December 31, 1995, the
total number of options exercisable under the 1995 Plan was 96,000 and
shares available for future grants under the 1995 Plan amounted to 260,000,
excluding 28,250 shares authorized by the Board but not included in the
1995 Plan. To date, no restricted stock awards have been granted.

7.INCOME TAXES

There is no provision for foreign, federal, state or local income taxes
for all periods presented since the Company has incurred operating losses
since inception and has established a valuation allowance equal to the
total deferred tax asset.

Domestic and foreign losses are comprised of the following:

<TABLE>
<CAPTION>
FOR THE PERIOD FROM FOR THE YEAR FOR THE PERIOD
NOVEMBER 9, 1994 ENDED FROM NOVEMBER 9,
(INCEPTION) TO DECEMBER 31, 1994 (INCEPTION) TO
DECEMBER 31, 1994 1995 DECEMBER 31, 1995
------------------- ------------ -------------------
<S> <C> <C> <C>
Domestic ............... $(300,000) $ (341,322) $ (641,322)
Israel ................. (1,356,174) (1,356,174)
--------- ----------- -----------
$(300,000) $(1,697,496) $(1,997,496)
========= =========== ===========
Deferred tax assets and
valuation allowance are
as follows:
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1994 1995
------------ ------------
<S> <C> <C>
Net operating loss carryforwards .................. $ -- $428,491
Deferred costs .................................... 120,000 251,401
Valuation allowance ............................... (120,000) (679,892)
-------- --------
$ -- $ --
======== ========
</TABLE>

As of December 31, 1995, the Company has net operating loss carryforward
for Israeli tax purposes of $1,190,254. The net operating loss carryforward
for the United States was not significant. The unused net operating loss
carryforwards in Israel has no expiration date.

F-11
<PAGE>

INFLUENCE, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
(Interim data is unaudited)

8.RELATED PARTY TRANSACTIONS

During 1994 and 1995, the Company acquired certain technologies from NMB
Medical Applications Ltd. ("NMB") an affiliate via common ownership. As
consideration for the technology, the Company paid and expensed $300,000 in
1994 and $26,500 in 1995. The Company has no additional obligation to pay
NMB regarding the acquired technology.

During 1995, the Company purchased equipment from NMB for $25,000.

Under the terms of an informal management agreement which commenced in
March 1995, the Company pays management fees of $7,000 per month to NMB.
The Company incurred management fee expense in connection with this
agreement totaling $70,000 for both the year ended December 31, 1995 and
the period from November 9, 1994 (inception) to December 31, 1995. Included
in accounts payable and accrued expenses at December 31, 1995 were
management fees payable totaling approximately $7,000.

9.NOTE TO INTERIM FINANCIAL STATEMENTS (UNAUDITED)

BASIS OF PRESENTATION

The interim financial statements are unaudited and reflect adjustments,
consisting of only normal recurring accruals, which are, in the opinion of
the Company's management, necessary for a fair presentation of the
financial position and results of operations for the periods presented.
Operating results for any interim period are not necessarily indicative of
the results for the full year.

STOCK OPTION PLAN

During the six months ended June 30, 1996, the Board granted 230,000
options from the 1995 Plan to employees at an exercise price of $5.00 per
share. These options vest over various periods none in excess of four
years. The fair market value of the Company's common stock, as determined
by the Board, on the dates of grant was in excess of $5.00 and accordingly
the Company is recognizing noncash compensation expense, on a pro rata
basis, over the respective options' vesting period for the difference
between the option exercise price and the underlying fair market value of
the Company's common stock. For the six months ended June 30, 1996, the
Company recognized $188,767 as noncash compensation expense. As of June 30,
1996, the Company has included the unamortized noncash compensation as a
component of stockholders' deficit.

In connection with an employment agreement dated August 1, 1996, the
Company is contractually obligated to grant stock options to purchase
25,000 of the Company's common stock upon the completion of an initial
public offering of the Company's common stock. The option exercise price
will be equal to the initial public offering price of the Company's common
stock and vesting will occur 25% immediately upon grant and 25% annually at
succeeding anniversaries over a three-year period.

F-12
<PAGE>

INFLUENCE, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONCLUDED
(Interim data is unaudited)

NOTE PAYABLE TO STOCKHOLDER

On June 10, 1996, the Company issued a promissory note (the "Note") to a
stockholder (the "Stockholder") for $1 million. The note bears interest at
the "Applicable Federal Rate" (6.30% at June 30, 1996) as defined by the
Internal Revenue Code and is payable, at the option of the Company, on or
before June 10, 1998.

ROYALTY AGREEMENT

During May 1996, the Company, as licensee, entered into a licensing
agreement with a member of the Company's Scientific Advisory Committee (the
"Consultant") regarding one of the Company's product candidates (the
"Product"). The Consultant, along with one of the Company's founders (the
"Founder"), jointly developed the Product. The terms of the license, among
other things, provides the Company with the right to distribute and sell
the Product worldwide in consideration for a 6% royalty (the "6% Royalty")
based on the Product's selling price. The agreement directs 50% of the 6%
Royalty to be paid to the Consultant with the balance due the Founder who
will contribute such amount back to the Company as contributed capital. The
Consultant is also entitled to an additional royalty (the "3% Royalty")
equal to 3% of the gross profit accruing to the Company related to other
transactions involving the Product, including, but not limited to, the
assignment or the sale to any third party of the rights to the Product.

Should the Company fail to develop a prototype of the Product by the end
of 1996 or fail to market the Product within two years, all rights under
the agreement would revert back to the Consultant and the Founder. The
Company also has the right to acquire the rights to the Product if certain
defined events occur at a purchase price computed based upon projected
future profits of the Product as defined. As of June 30, 1996, the Company
has not incurred either the 6% Royalty or the 3% Royalty.

OPERATING LEASE

During June 1996 the Company leased executive office space in San
Francisco, California under a non-cancelable operating lease which expires
in June 1998. The minimum monthly rental charge is $2,251.

SUBSEQUENT EVENTS

On July 24, 1996, the Board approved an amendment to the Company's
certificate of incorporation (the "Amendment"). The Amendment, among other
things, increased the number of authorized shares to 30,850,000 consisting
of 30 million shares of common stock, par value $0.001, and 850,000 shares
of preferred stock, par value $0.01. Shares of preferred stock may be
issued, in series or classes, at the discretion of the Board with rights
and privileges determined by the Board. The Amendment is subject to
approval by the stockholders of the Company.

During August 1996, the Company entered into employment agreements with
two of the Company's founders. In consideration for an annual salary of
$150,000, each founder, in addition to providing services to the Company,
agreed to comply with certain terms regarding confidentiality,
noncompetition and releases of intellectual property rights, as defined.

On August 14, 1996 the Company issued a second promissory note (the
"Second Note") to the Stockholder for $1 million. The terms and provisions
regarding the Second Note are identical to the Note and is payable, at the
option of the Company, on or before August 14, 1998.

F-13
<PAGE>

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

No dealer, sales representative or any other person has been authorized to give
any information or to make any representations in connection with this
offering, other than those made in this Prospectus, and, if given or made, such
information or representations must not be relied upon as having been
authorized by the Company or any of the Underwriters. This Prospectus does not
constitute an offer to sell or a solicitation of an offer to buy any securities
other than the shares of common stock to which it relates or a solicitation of
any person in any jurisdiction in which such offer or solicitation is unlawful.
Neither the delivery of the Prospectus nor any sale made hereunder shall, under
any circumstances, create any implication that there has been no change in the
affairs of the Company since the date hereof or that the information herein is
correct as of any time subsequent to the date hereof.

-------------------
TABLE OF CONTENTS
-------------------

Page
----
<S> <C>
Prospectus Summary.......................................................... 3
Risk Factors................................................................ 5
The Company................................................................. 15
Use of Proceeds............................................................. 15
Dividend Policy............................................................. 15
Capitalization.............................................................. 16
Dilution.................................................................... 17
Selected Consolidated Financial Data........................................ 18
Management's Discussion and Analysis of
Financial Condition and Results of Operations.............................. 19
Business.................................................................... 22
Management.................................................................. 43
Principal Stockholders...................................................... 43
Certain Transactions........................................................ 44
Description of Capital Stock................................................ 45
Shares Eligible for Future Sale............................................. 47
Israeli Taxation and Investment Programs.................................... 48
United States Federal Income Taxation....................................... 52
Underwriting................................................................ 55
Legal Matters............................................................... 55
Experts..................................................................... 55
Available Information....................................................... 55
Index To Financial Statements............................................... F-1
</TABLE>

Until , 1996 (25 days after the date of this Prospectus), all dealers
effecting transactions in the Common Stock offered hereby, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This delivery requirement is in addition to the obligation of dealers to
deliver a Prospectus when acting as underwriters and with respect to their
unsold allotments or subscriptions.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

[INFLUENCE LOGO]

COMMON STOCK

----------------
PROSPECTUS
----------------

Montgomery Securities

UBS Securities

Volpe, Welty & Company

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The expenses expected to be incurred in connection with the issuance and
distribution of the securities being registered under the Registration
Statement, other than underwriting discounts and commissions, are estimated in
the following table. All of such expenses will be borne by Influence, Inc.
("Influence"), to be as follows:

<TABLE>
<S> <C>
Securities and Exchange Commission registration fee.............. $ 13,880
NASD filing fee.................................................. 4,525
Nasdaq listing fee............................................... *
Printing and engraving expenses.................................. *
Legal fees and expenses.......................................... *
Accounting fees and expenses..................................... *
Blue Sky fees and expenses (including counsel fees).............. *
Directors' and Officers' Insurance expenses...................... *
Miscellaneous expenses........................................... *
----------
Total........................................................ $1,000,000
==========
</TABLE>
- --------
* To be filed by amendment.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Influence, Inc. a Delaware corporation, is empowered by Section 145 of the
Delaware General Corporation Law (the "Delaware Act"), subject to the
procedures and limitations stated therein, to indemnify certain parties.
Section 145 of the Delaware Act provides in part that a corporation shall have
the power to indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or
proceeding (other than an action by or in the right of the corporation) by
reason of the fact that such person is or was a director, officer, employee or
agent of the corporation or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation
or other enterprise, against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by him
in connection with such action, suit or proceeding if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.
Similar indemnity is authorized for such persons against expenses (including
attorneys' fees) actually and reasonably incurred in defense or settlement of
any threatened, pending or completed action or suit by or in the right of the
corporation, if such person acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the corporation, and
provided further that (unless a court of competent jurisdiction otherwise
provides) such person shall not have been adjudged liable to the corporation.
Any such indemnification may be made only as authorized in each specific case
upon a determination by the stockholders or disinterested directors that
indemnification is proper because the indemnitee has met the applicable
standard of conduct. Where an officer or a director is successful on the
merits or otherwise in the defense of any action referred to above, the
corporation must indemnify him against the expenses which such officer or
director actually or reasonably incurred. Section 145 provides further that
indemnification pursuant to its provisions is not exclusive of other rights of
indemnification to which a person may be entitled under any bylaw, agreement,
vote of stockholders or disinterested directors or otherwise.

Article Tenth of the Company's Second Restated Certificate of Incorporation,
as amended (the "Certificate") provides that the Company shall indemnify any
and all persons whom it has the power to indemnify under Section 145 of the
Delaware Act to the fullest extent permitted under such section, and such
indemnity shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
<PAGE>

Article Ninth of the Company's Certificate eliminates the personal liability
of the Company's directors to the fullest extent permitted under Section
102(b)(7) of the Delaware Act, as amended. Such section permits a company's
certificate of incorporation to eliminate or limit the personal liability of a
director to the corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director, provided that such provision shall not
eliminate or limit the liability of a director: (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders; (ii) for
acts or omissions not in good faith or which involve intentional misconduct or
a knowing violation of law; (iii) under Section 174 of the Delaware Act (which
addresses director liability for unlawful payment of a dividend or unlawful
stock purchase or redemption) or (iv) for any transaction from which the
director derived an improper personal benefit.

The Company intends to apply for a directors and officers insurance policy.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

Described below are sales of unregistered securities by the registrant
within the past three years:

(1) On December 14, 1994, the registrant issued 4,054,750 shares of Common
Stock at par value to the founders of the Company.

(2) From March 1995 through November 1995, 713,000 shares of Series A
Preferred Stock were sold to various investors at a price of $5.00 per
share.

(3) Pursuant to the 1995 Stock Option Plan, options to purchase 391,750
shares of Common Stock at $5.00 per share were issued to employees of
the registrant and certain other persons who had performed valuable
services to the Company.

The sales of securities referenced in paragraphs (1) and (2) were either
sold to persons outside the United States or were deemed to be exempt from
registration under the Securities Act of 1933 in reliance on Section 4(2)
thereof. The securities referenced in paragraph (3) were either granted to
persons outside the United States or were deemed to be exempt from
registration under the Securities Act of 1933 in reliance on Rule 701
promulgated under Section 3(b) thereof, as transactions by an issuer not
involving a public offering or transactions pursuant to compensatory benefit
plans and contracts relating to compensation as provided under Rule 701. The
recipients of securities in each such transaction represented their intention
to acquire the securities for investment only and not with a view to or for
sale in connection with any distribution thereof and appropriate legends were
affixed to the share certificates and instruments issued in such transactions.
All recipients had adequate access, though their relationships with the
Company, to information about the Registrant.

II-2
<PAGE>

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

<TABLE>
<C> <S>
EXHIBIT DESCRIPTION
NUMBER -----------
-------
1.1 Form of Underwriting Agreement*
3.1 Certificate of Incorporation of the Registrant
3.2 Bylaws of the Registrant
3.3 Second Amended and Restated Certificate of Incorporation of the
Registrant*
4.1 Specimen Certificate for Shares*
5.1 Opinion of Arnold & Porter, U.S. Counsel to the Registrant*
10.1 Letter Agreements between Dimotech Ltd. and the Registrant*
10.2 Employment Agreement dated May 31, 1996 between Peter A. Bick, M.D.,
and the Registrant
10.3 Promissory Notes dated June 10, 1996 and August 14, 1996, each in
principal amount of $1,000,000
payable to Lewis C. Pell
10.4 Agreement between Influence Medical Technologies Ltd. and Jerry G.
Blaivas, M.D.*
10.5 Agreement between Oren Globerman and the Registrant
10.6 Agreement between Dr. Mordechay Beyar and Registrant
10.7 1995 Stock Option Plan of the Registrant, together with a form of
agreement pursuant thereto
10.8 Employment Agreement of Mark Kramer*
10.9 Lease for Ramat Gan, Israel Facility*
10.10 Lease for San Francisco Office*
11.1 Statement of Computation of Loss Per Share
11.2 Pro Forma Statement of Computation of Loss Per Share
21.1 Subsidiaries of the Registrant
23.1 Consent of Arnold & Porter, U.S. counsel to the Registrant (contained
in Exhibit 5.1)*
23.2 Consent of Coopers & Lybrand L.L.P.
23.3 Consent of Levisohn, Lerner, Berger & Langsam, Patent Counsel to the
Registrant*
24.1 Powers of Attorney**
27.1 Financial Data Schedule
</TABLE>
- --------
*To be filed by amendment.
**Contained on page II-4.

ITEM 17. UNDERTAKINGS.

The undersigned Registrant hereby undertakes to provide to the Underwriters,
at the closing specified in the Underwriting Agreement, Shares in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery of Shares to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Securities Act") may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.

The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

II-3
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets
all the requirements for filing on Form S-1 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in New York, New York on the 19th day of August,
1996.

INFLUENCE, INC.

/s/ Peter A. Bick
By:__________________________________
Name: Peter A. Bick
Title: President and Chief
Executive Officer

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature appears
below constitutes and appoints Lewis C. Pell and Peter A. Bick, and each of
them, his true and lawful attorneys-in-fact and agents with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-
effective amendments) to this Registration Statement as well as any
registration statement filed pursuant to Rule 462(b) of the Securities Act of
1933, as amended, and to file the same with all exhibits thereto, and all
documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents or their substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED:

SIGNATURE TITLE DATE

/s/ Lewis C. Pell Chairman of the August 19, 1996
_____________________________________ Board of Directors
Lewis C. Pell and Director

/s/ Mordechay Beyar Vice Chairman of the August 19, 1996
_____________________________________ Board of Directors
Mordechay Beyar and Director

/s/ Oren Globerman Vice Chairman of the August 19, 1996
_____________________________________ Board of Directors
Oren Globerman and Director

/s/ Peter A. Bick President, Chief August 19, 1996
_____________________________________ Executive Officer
Peter A. Bick and Director
(Principal Executive
Officer)

Director , 1996
_____________________________________
Shimon Eckhouse

/s/ Rey Dante Cruz Treasurer (Principal August 19, 1996
_____________________________________ Accounting and
Rey Dante Cruz Financial Officer)

II-4
<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1.1 Form of Underwriting Agreement*
3.1 Certificate of Incorporation of the Registrant
3.2 Bylaws of the Registrant
3.3 Second Amended and Restated Certificate of Incorporation of the
Registrant*
4.1 Specimen Certificate for Shares*
5.1 Opinion of Arnold & Porter, U.S. Counsel to the Registrant*
10.1 Letter Agreements between Dimotech Ltd. and the Registrant*
10.2 Employment Agreement dated May 31, 1996 between Peter A. Bick, M.D.,
and the Registrant
10.3 Promissory Notes dated June 10, 1996 and August 14, 1996, each in
principal amount of $1,000,000 payable to Lewis C. Pell
10.4 Agreement between Influence Medical Technologies Ltd. and Jerry G.
Blaivas, M.D.*
10.5 Agreement between Oren Globerman and the Registrant
10.6 Agreement between Dr. Mordechay Beyar and Registrant
10.7 1995 Stock Option Plan of the Registrant, together with a form of
agreement pursuant thereto
10.8 Employment Agreement of Mark Kramer*
10.9 Lease for Ramat Gan, Israel Facility*
10.10 Lease for San Francisco Office*
11.1 Statement of Computation of Loss Per Share
11.2 Pro Forma Statement of Computation of Loss Per Share
21.1 Subsidiaries of the Registrant
23.1 Consent of Arnold & Porter, U.S. counsel to the Registrant (contained
in Exhibit 5.1)*
23.2 Consent of Coopers & Lybrand L.L.P.
23.3 Consent of Levisohn, Lerner, Berger & Langsam, Patent Counsel to the
Registrant*
24.1 Powers of Attorney**
27.1 Financial Data Schedule
</TABLE>
- --------
*To be filed by amendment.
**Contained on page II-4.

<PAGE>

EXHIBIT 3.1
-----------

CERTIFICATE OF AMENDMENT

INFLUENCE, INC.

*******************************************

Influence, Inc., a corporation organized and existing under and by virtue
of the General Corporation Law of the State of Delaware, does hereby certify:

FIRST: That the Board of Directors of said corporation by the unanimous
written consent of its members adopted a resolution proposing and declaring
advisable the following amendment to the Certificate of Incorporation of said
corporation:

RESOLVED, that the Certificate of Incorporation of Influence, Inc. be
amended by changing Article FOURTH so that said Article be and read as follows:

"FOURTH: The total number of shares of stock which the
Corporation shall have authority to issue is 5,550,000 shares
consisting of 4,800,000 shares of Common Stock with a par value
of one tenth of one cent ($.001) per share and 750,000 shares of
Preferred Stock with a par value of one cent ($.01) per share."

SECOND: That the aforesaid amendment was duly adopted in accordance with the
applicable provisions of Section 242 and 228 of the General Corporation Law of
the State of Delaware.

<PAGE>

IN WITNESS WHEREOF, said Corporation has caused this Certificate to be
signed by Andrew Smith, its president, this 3rd day of November, 1995.

INFLUENCE, INC.

By: /s/ Andrew M. Smith
-------------------------
Andrew M. Smith
Vice President-Operations

2
<PAGE>

AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION

INFLUENCE, INC.

Influence, Inc., organized and existing under and by virtue of the General
Corporation Law of the State of Delaware, does hereby amend and restate its
Certificate of Incorporation as follows: The Corporation was incorporated on
November 9, 1994. This Amended and Restated Certificate of Incorporation was
duly adopted in accordance with the applicable provisions of Sections 241 and
245 of the General Corporation Law of the State of Delaware.

FIRST: The name of the corporation is Influence, Inc. (the
"Corporation").

SECOND: The address of its registered office in the State of Delaware is
32 Loockerman Square, Suite L-100, Dover, Delaware 19901, County of Kent. The
name of the registered agent at such address is The Prentice-Hall Corporation
System, Inc.

THIRD: The nature of the business or purposes to be conducted or
promoted by the Corporation is to engage in any lawful act or activity for which
corporations may be organized under the General Corporation Law of the State of
Delaware.

FOURTH: the total number of shares of stock which the corporation shall
have authority to issue is 5,550,000 shares consisting of 5,000,000 shares of
Common Stock with a par value

3
<PAGE>

of one cent ($.01) per share and 550,000 shares of Preferred Stock, with a par
value of five dollars ($5.00) per share.

The Board of Directors shall be elected to the Board of Directors by a
majority vote of the shares of Common Stock voting thereon.

Any action to be taken by stockholders shall require a majority vote of the
shares of Common Stock voting thereon. The holders of a majority of the Common
Stock issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of stockholders
for the transaction of business.

The express terms and provisions of the shares so classified and designated
Preferred Stock, are as follows:

(i) The holders of both Preferred Stock shall not be entitled
to vote on any matters requiring or submitted to a vote of the
stockholders of the Corporation, except as expressly provided by the
General Corporation Law of the State of Delaware.

(ii) Holders of the shares of Preferred Stock may at any time
convert such preferred shares into shares of Common Stock at the rate
of one (1) share of Common Stock for each share of Preferred Stock.

(iii) Upon the dissolution or liquidation of the Corporation,
the holders of Preferred Stock shall be entitled to receive from the
assets available for distribution to the stockholders, payment of five
dollars (($5.00) per share before any payment shall be made to the
holders of the shares of any other class of stock. These payments
made to the holders of Preferred Stock shall be referred to as the
"Liquidation Amounts." The remainder of the assets available for
distribution of the Corporation, after the payment of five dollars
(($5.00) per share to

4
<PAGE>

the holders of the Preferred Stock shall be distributed to the holders
of all outstanding shares, Common and Preferred, equally on a per
share basis.

(iv) Upon the occurrence of an Extraordinary Preferred Stock
Event (as defined below), the Liquidation Amounts shall be adjusted by
multiplying the then effective Liquidation Amounts by a fraction, the
numerator of which shall be the number of shares of Preferred Stock
outstanding immediately prior to such Extraordinary Preferred Stock
Event and the denominator of which shall be the number of shares of
Preferred Stock outstanding immediately after such Extraordinary
Preferred Stock Event, and the product so obtained shall thereafter be
the Liquidation Amount. The Liquidation Amount, as so adjusted, shall
be readjusted in the same manner upon the occurrence of any subsequent
Extraordinary Preferred Stock Event or Events. An "Extraordinary
Preferred Stock Event" means (A) the issuance of the additional shares
of Preferred Stock as a dividend or other distribution of outstanding
shares of Preferred Stock of the Corporation, (b) a subdivision of
outstanding shares of Preferred Stock into a greater number of shares
of Preferred Stock, or ((C) a combination of outstanding shares of
Preferred Stock into a smaller number of shares of Preferred Stock.

(v) Upon the occurrence of an Extraordinary Common Stock Event
(as defined below), the number of shares of Common Stock into which
each share of Preferred Stock may be converted shall be adjusted by
multiplying the then number of shares of Common Stock issuable upon
conversion of Preferred Stock immediately prior to such Extraordinary
Common Stock Event and the denominator of which shall be the number of
shares of Common Stock outstanding immediately prior to such Common
Preferred Stock Event, and the product so obtained shall thereafter be
the adjusted number of shares of Common Stock issuable upon
conversion. Such rate of conversion, as so adjusted, shall be
readjusted in the same manner upon the occurrence of any subsequent
Extraordinary Common Stock Event or Events.

5
<PAGE>

An "Extraordinary Common Stock Event" means (A) the issuance of
additional shares of the Common Stock as a dividend or other
distribution on outstanding Common Stock of the Corporation, (B) a
subdivision of outstanding shares of Common Stock, or (C) a
combination of outstanding shares of Common Stock into a smaller
number of shares of Common Stock; provided, however, that in any of
such cases, if a similar event occurs resulting in a proportionate
increase or decrease in the number of shares of the Preferred Stock,
then no adjustment shall be made pursuant to this provision.

(vi) If the Common Stock issuable upon the conversion of
Preferred Stock shall be changed into the same or a different number
of shares of any class or classes of stock, whether by capital
reorganization, reclassification or otherwise (other than a
subdivision or combination of shares or stock dividend) then and in
each such event the holders of the shares of Preferred Stock shall
have the right thereafter to convert such shares into the kind and
amount of shares of stock and other securities and property receivable
upon such reorganization, reclassification or other change by the
holders of the number of shares of Common Stock into which such shares
of Preferred Stock could have been converted immediately prior to such
reorganization, reclassification or change, all subject to further
adjustment as provided herein.

(vii) If at any time or from time to time there shall be a
merger or consolidation of the Corporation with or into another
corporation where the Corporation is not the surviving entity, then,
as part of such merger or consolidation, provision shall be made so
that the holders of Preferred Stock shall thereafter be entitled to
receive, upon conversion of the Preferred Stock, the number of shares
of stock or other securities or property of the successor corporation
resulting from such merger or consolidation to which such holder had
converted its share of Preferred Stock immediately prior to such
merger or consolidation.

6
<PAGE>

(viii) To exercise its conversion privilege, a holder of
Preferred Stock shall surrender the certificate or certificates
representing the shares being converted to the Corporation at its
principal office, and shall give written notice to the Corporation at
that office that such holder elects to convert such shares. Such
notice shall also state the name or names (with address or addresses)
in which the certificate or certificates for shares of Common Stock
issuable upon such conversion shall be issued. The certificate or
certificates for shares of Preferred Stock surrendered for conversion
shall be accompanied by proper assignment thereof to the Corporation
or in blank. The date when such written notice is received by the
Corporation, together with the certificate or certificates
representing the shares of Preferred Stock being converted, shall be
the "Conversion Date." As promptly as practicable after the
Conversion Date, the Corporation shall issue and deliver to the holder
of the shares of Preferred Stock being converted, or on its written
order, such certificate or certificates as it may request for the
number of shares of Common Stock issuable upon the conversion of such
shares of Preferred Stock in accordance with the provisions of this
Article FOURTH, and cash, as provided in provision (ix) hereafter, in
respect of any fraction of share of Common Stock issuable upon such
conversion. Such conversion shall be deemed to have been effected
immediately prior to the close of business on the Conversion Date.

(ix) No fractional shares of Common Stock or scrip
representing fractional shares shall be issued upon the conversion of
shares of Preferred Stock. Instead of any fractional shares of Common
Stock which would otherwise be issuable upon conversion of Preferred
Stock, the Corporation shall pay to the holder of the shares of
Preferred Stock which were converted, the cash value of such
fractional shares in an amount based on the fair market value per
share of the Common Stock as determined by the Board of Directors, as
of the close of business on the Conversion Date.

7
<PAGE>

(x) In the event some but not all of the shares of Preferred
Stock represented by a certificate or certificates surrendered by a
holder are converted, the Corporation shall execute and deliver to or
on the order of the holder, at the expense of the Corporation, a new
certificate representing the number of shares of Preferred Stock which
were not converted.

(xi) The Corporation shall at all times reserve and keep
available authorized but unissued shares of Common Stock as shall from
time to time be sufficient for the conversion of all outstanding
shares of Preferred Stock into shares of Common Stock.

Dividends, when and as declared by the Board of Directors, shall be payable
to the holders of the Common and Preferred Stock equally on a per share basis.

FIFTH: The name and mailing address of the incorporator are as follows:

Name Mailing Address
---- ---------------

D. M. Baker 32 Loockerman Square
Suite L-100
Dover, Delaware 19904

SIXTH: The Corporation is to have perpetual existence.

SEVENTH: Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or

8
<PAGE>

of any receiver or receivers appointed for this corporation under the provisions
of Section 279 of Title 8 of the Delaware Code order a meeting of the creditors
or class of creditors, and/or of the stockholders or class of stockholders of
this corporation, as the case may be, to be summoned in such manner as the said
court directs. If a majority in number representing three-fourths in value of
the creditors or class or creditors, and/or of the stockholders or class of
stockholders of this corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of this corporation as consequence of such
compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class or creditors, and/or on
all the stockholders or class of stockholders, of this corporation, as the case
may be, and also on this corporation.

EIGHTH: For the management of the business and for the conduct of the
affairs of the corporation, and in further definition, limitation and regulation
of the powers of the corporation and of its directors and of its stockholders or
any class thereof, as the case may be, it is further provided:

1. The management of the business and for the conduct of the affairs
of the corporation shall be vested in its Board of Directors. The number of
directors which shall constitute the whole Board of Directors shall be fixed by,
or in the manner provided in, the By-Laws. The phrase "whole Board" and the

9
<PAGE>

phrase "total number of directors" shall be deemed to have the same meaning, to
wit, the total number of directors which the corporation would have if there
were no vacancies. No election of directors need be by written ballot.

2. After the original or other By-Laws of the corporation have been
adopted, amended, or repealed, as the case may be, in accordance with the
provisions of Section 109 of the General Corporation Law of the State of
Delaware, and, after the corporation has received any payment for any of its
stock, the power to adopt, amend, or repeal the By-Laws of the corporation may
be exercised by the Board of Directors of the corporation; provided, however,
that any provision for the classification of directors of the corporation for
staggered terms pursuant to the provisions of subsection (d) of Section 141 of
the General Corporation Law of the State of Delaware shall be set forth in an
initial By-Law or in a By-Law adopted by the stockholders entitled to vote of
the corporation unless provisions for such classification shall be set forth in
this certificate of incorporation.

3. Whenever the corporation shall be authorized to issue only one
class of stock, each outstanding share shall entitle the holder thereof to
notice of, and the right to vote, at any meeting of stockholders. Whenever the
corporation shall be authorized to issue more than one class of stock, no
outstanding share of any class of stock which is denied voting power under the
provisions of the certificate of incorporation

10
<PAGE>

shall entitle the holder thereof to the right to vote at any meeting of
stockholders except as the provisions of paragraph (2) of subsection (b) of
section 242 of the General Corporation Law of the State of Delaware shall
otherwise; provided, that no share of any such class which is otherwise denied
voting power shall entitle the holder thereof to vote upon the increase or
decrease in the number of authorized shares of said class.

NINTH: The personal liability of the directors of the corporation is
hereby eliminated to the fullest extent permitted by the provisions of paragraph
(7) of subsection (b) of Section 102 of the General Corporation Law of the State
of Delaware, as the same may be amended and supplemented.

TENTH: The corporation shall, to the fullest extent permitted by the
provisions of Section 145 of the General Corporation Law of the State of
Delaware, as the same may be amended and supplemented, indemnify any and all
persons whom it shall have the power to indemnify under said section from and
against any and all of the expenses, liabilities or other matters referred to in
or covered by said section, and the indemnification provided for herein shall
not be deemed exclusive of any other rights to which those indemnified may be
entitled under any B-Law, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office, and shall continue as to a
person who has ceased to be a director, officer, employee or agent and shall
inure to the

11
<PAGE>

benefit of the heirs, executors and administrators of such a person.

ELEVENTH: From time to time any of the provisions of this certificate of
incorporation may be amended, altered or repealed, and other provisions
authorized by the laws of the State of Delaware at the time in force may be
added or inserted in the manner and at the time prescribed by said laws, and all
rights at any time conferred upon the stockholders of the corporation by this
certificate of incorporation are granted subject to the provisions of this
Article ELEVENTH.

IN WITNESS WHEREOF, the corporation has issued its corporate seal to be
affixed thereto and this amended and restated certificate of incorporation to be
signed by its Incorporator this 11th day of January, 1995.

/s/ Lewis C. Pell
-----------------------
Lewis C. Pell
Director

<PAGE>

EXHIBIT 3.2

DATED: JULY 24, 1996

BY-LAWS
OF
INFLUENCE, INC.

ARTICLE I
OFFICES
Section 1. Principal Office. The principal office of the Corporation
--------- ----------------
shall be located in San Francisco, California or such other location as the
Board may from time to time determine.

Section 1.2. Other Offices. The Corporation may also have offices at such
----------- -------------
other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the Corporation may
require.

ARTICLE II
MEETINGS OF SHAREHOLDERS

Section 2.1. Place of Meetings. All meetings of shareholders shall be
----------- -----------------
held at the principal office of the Corporation, or at such other place within
or without the State of Delaware as shall be stated in the notice of the meeting
or in a duly executed waiver of notice thereof.

Section 2.2. Annual Meetings. The annual meeting of shareholders shall be
----------- ---------------
held at such time on such day as the Board of Directors in each year determines.
At the annual meeting, the shareholders entitled to vote for the election of
directors shall elect, by a
<PAGE>

-2-

DATED: JULY 24, 1996

plurality vote, a Board of Directors and transact such other business as may
properly come before the meeting.

Section 2.3. Special Meetings. Special meetings of shareholders, for any
----------- ----------------
purpose or purposes, may be called by the Board of Directors and shall be called
promptly by the Board of Directors at the written request of a majority of the
entire Board of Directors then in office or the holders of record of at least
twenty-five per cent (25%) of the issued and outstanding shares of the Common
Stock of the Corporation. Any such request shall state the purpose or purposes
of the proposed meeting. At any special meeting of shareholders, only such
business may be transacted as is related to the purpose or purposes set forth in
the notice of such meeting.

Section 2.4. Notice of Meetings. Written notice of every meeting of
----------- ------------------
shareholders, stating the place, date and hour thereof, and, in the case of a
special meeting of shareholders, the purpose or purposes thereof and the person
or persons by whom or at whose direction such meeting has been called and such
notice is being issued, shall be given not less than ten (10) nor more than
sixty (60) days before the date of the meeting, either personally or by mail, by
or at the direction of the President, the Secretary, or the persons calling the
meeting, to each shareholder of record entitled to vote at such meeting.
Nothing herein contained shall preclude the shareholders from waiving notice as
provided in Section 4.1 hereof.

Section 2.5. Adjournments. Any meeting of stockholders, annual or
----------- ------------
special, may adjourn from time to time to reconvene at the same or some other
place, and notice need not be given of any such adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the corporation may
<PAGE>

-3-

DATED: JULY 24, 1996

transact any business which might have been transacted at the original meeting.
If the adjournment is for more than thirty days, or if after the adjournment a
new record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting.

Section 2.6. Quorum. The holders of a majority of the issued and
----------- ------
outstanding shares of stock of the Corporation entitled to vote, represented in
person or by proxy, shall be necessary to and shall constitute a quorum for the
transaction of business at any meeting of shareholders. If, however, such
quorum shall not be present or represented at any meeting of shareholders, the
shareholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum shall be present or
represented, when any business may be transacted that might have been transacted
at the meeting as originally noticed. Notwithstanding the foregoing, if after
any such adjournment the Board of Directors shall fix a new record date for the
adjourned meeting, a notice of such adjourned meeting shall be given as provided
in Section 2.4 of these By-Laws, but such notice may be waived as provided in
Section 4.1 hereof.

Section 2.7 . Organization. Meetings of stockholders shall be presided
------------ ------------
over by the Chairman of the Board, if any, or in his absence by the President,
or in his absence by a Vice President, if any, or in the absence of the
foregoing persons by a chairman designated by the Board of Directors, or in the
absence of such designation by a chairman chosen at the meeting. The Secretary
shall act as secretary of the meeting, but in his absence the chairman of the
meeting may appoint any person to act as secretary of the meeting.
<PAGE>

-4-

DATED: JULY 24, 1996

Section 2.8. Voting. At each meeting of shareholders, each holder of
----------- ------
record of shares of stock entitled to vote shall be entitled to vote in person
or by proxy, and each such holder shall be entitled to one vote for every share
standing in his name on the books of the Corporation as of the record date fixed
by the Board of Directors or prescribed by law and, if a quorum is present, a
majority of the shares of such stock present or represented at any meeting of
shareholders shall be the vote of the shareholders with respect to any item of
business, unless otherwise provided by any applicable provision of law, by these
By-Laws or by the Certificate of Incorporation.

Section 2.9. Proxies. (a) Each stockholder entitled to vote at a meeting
----------- -------
of stockholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for him by
proxy, but no such proxy shall be voted or acted upon after 3 years from its
date, unless the proxy provides for a longer period.

(b) Without limiting the manner in which a stockholder may authorize
another person or persons to act for him as proxy of this section, the following
shall constitute a valid means by which a stockholder may grant such authority.

(1) A stockholder may execute a writing authorizing another person
or persons to act for him as proxy. Execution may be
accomplished by the stockholder or his authorized officer,
director, employee or agent signing such writing or causing his
or her signature to be affixed to such writing by any reasonable
means including, but not limited to, by facsimile signature.
<PAGE>

-5-

DATED: JULY 24, 1996

(2) A stockholder may authorize another person or persons to act for
him as proxy by transmitting or authorizing the transmission of
a telegram, cablegram, or other means of electronic transmission
to the person who will be the holder of the proxy or to a proxy
solicitation firm, proxy support service organization or like
agent duly authorized by the person who will be the holder of
the proxy to receive such transmission, provided that any such
telegram, cablegram or other means of electronic transmission
must either set forth or be submitted with information from
which it can be determined that the telegram, cablegram or other
electronic transmission was authorized by the stockholder. If
it is determined that such telegrams, cablegrams or other
electronic transmissions are valid, the inspectors or, if there
are no inspectors, such other persons making that determination
shall specify the information upon which they relied.

(c) Any copy, facsimile telecommunication or other reliable
reproduction of the writing or transmission created pursuant to this section may
be substituted or used in lieu of the original writing or transmission for any
and all purposes for which the original writing or transmission could be used,
provided that such copy, facsimile telecommunication or other reproduction shall
be a complete reproduction of the entire original writing or transmission.

(d) A duly executed proxy shall be irrevocable if it states that it
is irrevocable and if, and only as long as, it is coupled with an interest
sufficient in law to support an irrevocable power. A proxy may be made
irrevocable regardless of whether the
<PAGE>

-6-

DATED: JULY 24, 1996

interest with which it is coupled is an interest in the stock itself
or an interest in the corporation generally.

Section 2.10. Written Consents. (a) Whenever a vote of shareholders
------------ ----------------
at a meeting thereof is required or permitted to be taken in connection with any
corporate action, the meeting and vote of shareholders may be dispensed with if
a consent or consents in writing, setting forth the action so taken, shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted and
shall be delivered to the corporation by delivery to its registered office, its
principal place of business, or an officer or agent of the corporation having
custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to a corporation's registered office shall be by hand
or by certified or registered mail, return receipt requested.

(b) Every written consent shall bear the date of signature of each
stockholder who signs the consent and no written consent shall be effective to
take the corporate action referred to therein unless, within sixty days of the
earliest dated consent delivered in the manner required by this Section to the
corporation, written consents signed by a sufficient number of holders to take
action are delivered to the corporation by delivery to its registered office,
its principal place of business, or an officer or agent of the corporation
having custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to a corporation's registered office shall be by hand
or by certified or registered mail, return receipt requested.
<PAGE>

-7-

DATED: JULY 24, 1996

(c) Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to all
stockholders.

ARTICLE III
DIRECTORS

Section 3.1. Numbers. The number of directors of the Corporation
----------- -------
which shall constitute the entire Board of Directors shall be fixed from time to
time by a vote of a majority of the entire Board and shall be not less than one
(1) nor more than seven (7).

Section 3.2. Qualifications, Election and Tenure. Directors shall be
----------- -----------------------------------
at least eighteen (18) years of age but need not be residents of the State of
Delaware. Directors need not be shareholders of the Corporation. Except as
otherwise provided in these By-Laws, directors shall be elected at the annual
meeting of shareholders, and each director so elected shall hold office until
the next annual meeting of shareholders and until his successor has been elected
and has qualified.

Section 3.3. Resignation and Removal. Any director may resign at any
----------- -----------------------
time upon notice of resignation to the Corporation and, to the extent permitted
by law, any director may be removed, either with or without cause, at any time
by vote of the shareholders at a special meeting called for that purpose or by
the Board of Directors with cause.

Section 3.4. Newly Created Directorships and Vacancies. Newly
----------- -----------------------------------------
created directorships resulting from an increase in the number of directors and
vacancies occurring in the Board of Directors for any reason whatsoever, except
the removal of directors without
<PAGE>

-8-

DATED: JULY 24, 1996

cause, shall be filled by vote of the Board. If the number of directors then in
office is less than a quorum, such newly created directorships and vacancies may
be filled by a vote of a majority of the directors then in office. Any director
elected to fill a vacancy shall be elected until the next meeting of
shareholders at which the election of directors is in the regular course of
business, and until his successor has been elected and qualified. Vacancies
occurring in the Board by reason of the removal of directors without cause shall
be filled by vote of the shareholders unless the shareholders shall adopt a By-
Law provided that the Board may fill such vacancies.

Section 3.5. Powers and Duties. Subject to the applicable provision
----------- -----------------
of law, these By-Laws or the Certificate of Incorporation, but in furtherance
and not in limitation of any rights therein conferred, the Board of Directors
shall have the control and management of the business and affairs of the
Corporation and do all such lawful acts and things as may be exercised by the
Corporation.

Section 3.6. Place of Meetings. All meetings of the Board of
----------- -----------------
Directors may be held either within or without the State of Delaware.

Section 3.7. Annual Meetings. An annual meeting of each newly
----------- ---------------
elected Board of Directors shall be held immediately following the annual
meeting of shareholders, and no notice of such meeting to the newly elected
directors shall be necessary in order legally to constitute the meeting,
provided a quorum shall be present, or the newly elected directors may meet at
such time and place as shall be fixed by the written consent of all such
directors.
<PAGE>

-9-

DATED: JULY 24, 1996

Section 3.8. Regular Meetings. Regular meetings of the Board of
----------- ----------------
Directors may be held upon such notice or without notice, at such time and at
such place as shall from time to time be determined by the Board.

Section 3.9. Special Meetings. Special meetings of the Board of
----------- ----------------
Directors may be called by the President and shall be called promptly by the
President or the Secretary upon the written request of any director specifying
the special purpose thereof, on not less than twenty four (24) hours notice to
each director. Such request shall state the date, time and place of meeting.
Neither the business to be transacted at, nor the purpose of, any regular or
special meeting of the Board of Directors need be specified in the notice or
waiver of notice of such meeting.

Section 3.10. Notice of Meetings. Notice of each special meeting of
------------ ------------------
the Board (and of each regular meeting for which notice shall be required) shall
be given by the President, the Secretary or an Assistant Secretary and shall
state the place, date and time of the meeting. Notice of each such meeting
shall be given orally or shall be mailed to each director at his residence or
usual place of business. If notice of less than one week is given, it shall be
oral, whether by telephone or in person, or sent by special delivery mail or
telegraph. If mailed, the notice shall be given when deposited in the United
States mail, postage prepaid. Notice of any meeting need not be given to any
director who shall submit, either before or after the meeting, a signed waiver
of notice of who shall attend such meeting without protesting, prior to or at
its commencement, the lack of notice to him. Notice of any adjourned meeting,
including the place, date and time of the new meeting, shall be given to
<PAGE>

-10-

DATED: JULY 24, 1996

all directors not present at the time of the adjournment, as well as
to the other directors unless the place, date and time of the new meeting is
announced at the adjourned meeting.

Section 3.11. Quorum and Voting. At all meetings of the Board of
------------ -----------------
Directors a majority of the Directors then in office shall be necessary to and
shall constitute a quorum for the transaction of business at any meeting of
directors, unless otherwise provided by any applicable provision of law, by
these By-Laws, or by the Certificate of Incorporation. The act of a majority of
the directors present at the time of the vote, if a quorum is present at such
time, shall be the act of the Board of Directors, unless otherwise provided by
any applicable provision of law, by these By-Laws or by the Certificate of
Incorporation. If a quorum shall not be present at any meeting of the Board of
Directors, the directors present thereat may adjourn the meeting from time to
time, until a quorum shall be present.

Section 3.12. Compensation. The Board of Directors, by the
------------ ------------
affirmative vote of a majority of the directors then in office, and irrespective
of any personal interest of any of its members, shall have authority to
establish reasonable compensation of all directors for services to the
Corporation as directors, officers or otherwise.

Section 3.13. Books and Records. The directors may keep the books of
------------ -----------------
the Corporation, except such as are required by law to be kept within the state,
outside of the State of Delaware, at such place or places as they may from time
to time determine.

Section 3.14. Action Without a Meeting. Any action required or
------------ ------------------------
permitted to be taken by the Board, or by a committee of the Board, may be taken
without a meeting if all members of the Board of the committee, as the case may
be, consent in writing to the adoption of a resolution authorizing the action.
Any such resolution and the written consents
<PAGE>

-11-

DATED: JULY 24, 1996

thereto by the members of the Board or committee shall be filed with the minutes
of the proceedings of the Board or committee.

Section 3.15. Telephone Participation. Any one or more members of
------------ -----------------------
the Board, or any committee of the board, may participate in a meeting of the
Board or committee by means of a conference telephone call or similar
communications equipment allowing all persons participating in the meeting to
hear each other at the same time. Participation by such means shall constitute
presence in person at a meeting.

Section 3.16. Committee of the Board. The Board, by resolution
------------ ----------------------
adopted by a majority of the entire Board, may designate from among its members
an executive committee and other committees, each consisting of one (1) or more
directors. The Board may designate one or more directors as alternate members
of any such committee. Such alternate members may replace any absent member or
members at any meeting of such committee. Each committee (including the members
thereof) shall serve at the pleasure of the Board and shall keep minutes of its
meetings and report the same to the Board.

Section 3.17. Committee Rules. Unless the Board of Directors
------------ ---------------
otherwise provides, each committee designated by the Board of Directors may
make, alter and repeal rules for the conduct of its business. In the absence of
such rules each committee shall conduct its business in the same manner as the
Board of Directors conducts its business pursuant to Article III of these by-
laws.

Section 3.18. Authority of Committees; Duties of Directors. Except
------------ --------------------------------------------
as otherwise provided by law, each such committee, to the extent provided in the
resolution establishing, shall have and may exercise all the authority of the
Board with respect to
<PAGE>

-12-

DATED: JULY 24, 1996

all matters. The designation of any committee and the delegation of authority
thereto shall not alone relieve any director of his duty to the Corporation.

ARTICLE IV
WAIVER
Section 4.1. Waiver. Whenever a notice is required to be given by
----------- ------
any provision of law, by these By-Laws, or by the Certificate of Incorporation,
a waiver thereof in writing, whether before or after the time stated therein,
shall be deemed equivalent to such notice. Attendance of a person at a meeting
shall constitute a waiver of notice of such meeting, except when the person
attends the meeting for the express purpose of objecting at the beginning of the
meeting to the transaction of any business because the meeting is not lawfully
called or convened.

ARTICLE V
OFFICERS

Section 5.1. Executive Officers. The Board of Directors shall elect
----------- ------------------
a President, a Secretary, a Chairman, and may choose one or more Vice-Chairmen,
a Vice President, a Treasurer and one or more Assistant Secretaries. Any number
of offices may be held by the same person. The executive officers of the
Corporation shall be elected annually (and from time to time by the Board of
Directors, as vacancies occur), at the annual meeting of the Board of Directors
following the meeting of shareholders at which the Board
<PAGE>

-13-

DATED: JULY 24, 1996

of Directors was elected. The election of any director as President shall
require the vote of a majority of disinterested directors.

Section 5.2. Other Officers. The Board of Directors may appoint such
----------- --------------
other officers and agents, including additional Vice Presidents and one or more
Assistant Vice Presidents, Assistant Secretaries and Assistant Treasurers, as it
shall at any time or from time to time deem necessary or advisable.

Section 5.3. Authorities and Duties. All officers, as between
----------- ----------------------
themselves and the Corporation, shall have such authority and perform such
duties in the management of the business and affairs of the Corporation as may
be provided in these By-Laws, or, to the extent not so provided, as may be
prescribed by the Board of Directors.

Section 5.4. Tenure and Removal. The officers of the Corporation
----------- ------------------
shall be elected or appointed to hold office until their respective successors
are elected or appointed. All officers shall hold office at the pleasure of the
Board of Directors, and any officer elected or appointed by the Board of
Directors may be removed at any time by the Board of Directors for cause or
without cause at any regular or special meeting. The removal of any director as
President shall require the vote of a majority of disinterested directors.

Section 5.5. Vacancies. Any vacancy occurring in any office of the
----------- ---------
Corporation, whether because of death, resignation or removal, with or without
cause, or any other reason, may be filled by the Board of Directors for the
unexpired term.

Section 5.6. Compensation. The salaries and other compensation of
----------- ------------
all officers and agents of the Corporation shall be fixed by or in the manner
prescribed by the Board of Directors.
<PAGE>

-14-

DATED: JULY 24, 1996

Section 5.7. The Chairman. The Chairman shall preside at all
----------- ------------
meetings of the shareholders and the directors. The Chairman shall have
general management of the business of the Corporation, subject to the control of
the Board of Directors. In the absence of the Chairman, a Vice-Chairman, if
there shall be any, shall preside at all meetings of the shareholders and
directors.

Section 5.8. President. The President shall be the chief executive
----------- ---------
officer of the Corporation. The President, in the absence of the Chairman and
Vice-Chairman, if any, shall preside at all meetings of the shareholders and the
directors. The President shall have active management responsibility for the
business and affairs of the Corporation and be responsible for its day-to-day
operations, subject to the control of the Board of Directors, and shall see to
it that all orders and resolutions of the Board of Directors are carried into
effect.

Section 5.9. Vice Presidents. The Vice President, if there be one,
----------- ---------------
or, if there shall be more than one, each Vice President, shall have such powers
and shall perform such duties as may from time to time be assigned to him by the
Board of Directors.

Section 5.10. Secretary. The Secretary shall attend all meetings of
------------ ---------
the shareholders and all meetings of the Board of Directors and shall record all
proceedings taken at such meeting in a book to be kept for that purpose; he
shall see that all notices of meetings of shareholders and special meetings of
the Board of Directors are duly given in accordance with the provisions of these
By-Laws or as required by law; he shall be the custodian of the records and of
the corporate seal or seals of the Corporation; he, or an Assistant Secretary,
shall have authority to affix the corporate seal or seals to all documents, the
execution of which, on behalf of the Corporation, under its seal, is duly
authorized, and when so affixed
<PAGE>

-15-

DATED: JULY 24, 1996

it may be attested by his signature or the signature of such Assistant
Secretary; and in general, he shall perform all duties incident to the office of
the Secretary of a corporation, and such other duties as the Board of Directors
may from time to time prescribe. The Board of Directors may give general
authority to any other officer to affix the seal of the Corporation and to
attest the affixing by his signature.

Section 5.11. Treasurer. The Treasurer, if there shall be one, shall
------------ ---------
have charge of and be responsible for all funds, securities, receipts and
disbursements of the Corporation and shall deposit, or cause to be deposited, in
the name and to the credit of the Corporation, all moneys and valuable effects
in such banks, trust companies, or other depositaries as shall from time to time
be selected by the Board of Directors. He shall keep full and accurate accounts
of receipts and disbursements in books belonging to the Corporation; he shall
render to the Chairman, the President and to each member of the Board of
Directors, whenever requested, an account of all of his transactions as
Treasurer and of the financial condition of the Corporation; and in general, he
shall perform all of the duties incident to the office of the Treasurer of a
corporation, and such other duties incident to the office of the Treasurer of a
corporation, and such other duties as the Board of Directors may from time to
time prescribe.

Section 5.12. Other Officers. The Board of Directors may also elect
------------ --------------
or may delegate to the President the power to appoint such other officers as it
may at any time or from time to time deem advisable, and any officers so elected
or appointed shall have such authority and perform such duties as the Board of
Directors or the President, if he shall have appointed them, may from time to
time prescribe.
<PAGE>

-16-

DATED: JULY 24, 1996

ARTICLE VI
PROVISIONS RELATING TO STOCK CERTIFICATES
AND SHAREHOLDERS

Section 6.1. Form and Signature. The shares of the Corporation shall
----------- ------------------
be represented by certificates signed by the Chairman, if any, or the President
or by any Vice President, if any, and the Secretary or an Assistant Secretary,
if any, or the Treasurer, if any, or an Assistant Treasurer, if any, and shall
bear the seal of the Corporation or a facsimile thereof. Any or all of the
signatures on the certificate may be a facsimile. Each certificate representing
shares shall state upon its face (a) that the Corporation is formed under the
laws of the State of Delaware, (b) the name of the person or persons to whom it
is issued, (c) the number of shares which such certificate represents and (d)
the par value, if any, of each such share represented by such certificate.

Section 6.2. Registered Shareholders. The Corporation shall be
----------- -----------------------
entitled to recognize the exclusive right of a person registered on its books as
the owner of shares of stock to receive dividends or other distributions, and to
vote as such owner, and to hold liable for calls and assessments a person
registered on its books as the owner of shares of stock, and shall not be bound
to recognize any equitable or legal claim to or interest in such shares on the
part of any other person.

Section 6.3. Transfer of Stock. Upon surrender to the Corporation or
----------- -----------------
the appropriate transfer agent, if any, of the Corporation, of a certificate
representing shares of stock duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer; and, in the event that the
certificate refers to any agreement restricting
<PAGE>

-17-

DATED: JULY 24, 1996

transfer of the shares which it represents, proper evidence of compliance with
such agreement, a new certificate shall be issued to the person entitled
thereto, and the old certificate cancelled and the transaction recorded upon the
books of the Corporation.

Section 6.4. Lost Certificates, etc. The Corporation may issue a new
----------- -----------------------
certificate for shares in place of any certificate theretofore issued by it,
alleged to have been lost, mutilated, stolen or destroyed, and the Board may
require the owner of such lost, mutilated, stolen or destroyed certificate, or
his legal representatives, to make an affidavit of that fact and/or to give the
Corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the Corporation on account of the alleged loss,
mutilation, theft or destruction of any such certificate or the issuance of any
such new certificate.

Section 6.5. Record Date. For the purposes of determining the
----------- -----------
shareholders entitled to notice of, or to vote at, any meeting of shareholders
or any adjournment thereof, or to express consent to, or dissent from, any
proposal without a meeting, or for the purpose of determining shareholders
entitled to receive payment of any dividend or the allotment of any rights, or
for the purpose of any other action, the Board may fix, in advance, a record
date. Such date shall not precede the date upon which the resolution fixing the
record date is adopted by the Board of Directors and which record date:
(1) in the case of determination of stockholders entitled to vote at any meeting
of stockholders or adjournment thereof, shall, unless otherwise required by law,
not be more than sixty nor less than ten days before the date of such meeting;
(2) in the case of determination of stockholders entitled to express consent to
corporate action in writing without a meeting, shall not be more
<PAGE>

-18-

DATED: JULY 24, 1996

than ten days from the date upon which the resolution fixing the record date is
adopted by the Board of Directors; and (3) in the case of any other action,
shall not be more than sixty days prior to such other action. If no record date
is fixed: (1) the record date for determining stockholders entitled to notice of
or to vote at a meeting of stockholders shall be at the close of business on the
day next preceding the day on which notice is given, or, if notice is waived, at
the close of business on the day next preceding the day on which the meeting is
held; (2) the record date for determining stockholders entitled to express
consent to corporate action in writing without a meeting when no prior action of
the Board of Directors is required by law, shall be the first date on which a
signed written consent setting forth the action taken or proposed to be taken is
delivered to the corporation in accordance with applicable law, or, if prior
action by the Board of Directors is required by law, shall be at the close of
business on the day on which the Board of Directors adopts the resolution taking
such prior action; and (3) the record date for determining stockholders for any
other purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.

Section 6.6. Regulations. Except as otherwise provided by law, the
----------- -----------
Board may make such additional rules and regulations, not inconsistent with
these By-Laws, as it may deem expedient, concerning the issue, transfer and
registration of certificates for the securities of the Corporation. The Board
may appoint, or authorize any officer or officers to
<PAGE>

-19-

DATED: JULY 24, 1996

appoint, one or more transfer agents and one or more registrars and may require
all certificates for shares of capital stock to bear the signature or signatures
of any of them.

ARTICLE VII
GENERAL PROVISIONS

Section 7.1. Dividends and Distributions. Dividends and other
----------- ---------------------------
distributions upon or with respect to outstanding shares of stock of the
Corporation may be declared by the Board of Directors at any regular or special
meeting, and may be paid in cash, bonds, property, or in stock of the
Corporation. The Board shall have full power and discretion, subject to the
provisions of the Certificate of Incorporation or the terms of any other
corporate document or instrument binding upon the Corporation to determine what,
if any, dividends or distributions shall be declared and paid or made.

Section 7.2. Checks, etc. All checks or demands for money and notes
----------- ------------
or other instruments evidencing indebtedness or obligations of the Corporation
shall be signed by such officer or officers or other person or persons as may
from time to time be designated by the Board of Directors.

Section 7.3. Seal. The corporate seal shall have inscribed thereon
----------- ----
the name of the Corporation, the year of its incorporation and the words
"Corporate Seal Delaware". The seal may be used by causing it or a facsimile
thereof to be impressed or affixed or otherwise reproduced.

Section 7.4. Fiscal Year. The fiscal year of the Corporation shall
----------- -----------
be determined by the Board of Directors.
<PAGE>

-20-

DATED: JULY 24, 1996

Section 7.5. General and Special Bank Accounts. The Board may
----------- ---------------------------------
authorize from time to time the opening and keeping of general and special bank
accounts with such banks, trust companies or other depositories as the Board may
designate or as may be designated by any officer or officers of the Corporation
to whom such power of designation may be delegated.

ARTICLE VIII
INDEMNIFICATION OF DIRECTORS,
OFFICERS AND OTHER PERSONS

Section 8.1. Right to Indemnification. The corporation shall
----------- ------------------------
indemnify and hold harmless, to the fullest extent permitted by applicable law
as it presently exists or may hereafter be amended, any person who was or is
made or is threatened to be made a party or is otherwise involved in any action,
suit or proceeding, whether civil, criminal, administrative or investigative (a
"proceeding") by reason of the fact that he, or a person for whom he is the
legal representative, is or was a director, officer, employee or agent of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or of a partnership,
joint venture, trust, enterprise or non-profit entity, including service with
respect to employee benefit plans, against all liability and loss suffered and
expenses reasonably incurred by such person. The corporation shall be required
to indemnify a person in connection with a proceeding initiated by such person
only if the proceeding was authorized by the Board of Directors of the
corporation.
<PAGE>

-21-

DATED: JULY 24, 1996

Section 8.2. Prepayment of Expenses. The corporation shall pay the
----------- ----------------------
expenses, including attorneys' fees, of any person entitled by this Article VIII
to be indemnified if such expenses were incurred in defending any proceeding in
advance of its final disposition, provided, however, that the payment of
expenses incurred by any person in advance of the final disposition of the
proceeding shall be made only upon receipt of an undertaking by such person to
repay all amounts advanced if it should be ultimately determined that such
person is not entitled to be indemnified under this Article or otherwise.

Section 8.3. Claims. If a claim for indemnification or payment of
----------- ------
expenses under this Article is not paid in full within sixty days after a
written claim therefor has been received by the corporation the claimant may
file suit to recover the unpaid amount of such claim and, if successful in whole
or in part, shall be entitled to be paid the expense of prosecuting such claim.
In any such action the corporation shall have the burden of proving that the
claimant was not entitled to the requested indemnification or payment of
expenses under applicable law.

Section 8.4. Determination of Indemnification. Any indemnification
----------- --------------------------------
under this Article VIII (unless ordered by a court) shall be made by the
corporation only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances because he has met the applicable standard of conduct set forth in
applicable law. Such determination shall be made (1) by the board of directors
by a majority vote of a quorum consisting of directors who were not parties to
such action, suit or proceeding, or (2) if such a quorum is not obtainable, or,
even if
<PAGE>

-22-

DATED: JULY 24, 1996

obtainable a quorum of disinterested directors so directs, by independent legal
counsel in a written opinion, or (3) by the stockholders.

Section 8.5. Non-Exclusivity of Rights. The rights conferred on any
----------- -------------------------
person by this Article VIII shall not be exclusive of any other rights which
such person may have or hereafter acquire under any statute, provision of the
certificate of incorporation, these by-laws, agreement, vote of stockholders or
disinterested directors or otherwise.

Section 8.6. Other Indemnification. The corporation's obligation, if
----------- ---------------------
any, to indemnify any person who was or is serving at its request as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust, enterprise or non-profit entity shall be reduced by any amount such
person may collect as indemnification from such other corporation, partnership,
joint venture, trust, enterprise or non-profit enterprise.

Section 8.7. Amendment or Repeal. Any repeal or modification of the
----------- -------------------
foregoing provisions of this Article VIII shall not adversely affect any right
or protection hereunder of any person in respect of any act or omission
occurring prior to the time of such repeal or modification.

ARTICLE IX
ADOPTION AND AMENDMENTS

Section 9.1. Power to Amend. These By-Laws may be amended or
----------- ---------------
repealed and any new By-Law may be adopted at any annual or special meeting by
vote of a majority of the shareholders of the Corporation entitled at the time
to vote for the election of directors; or by unanimous written consent of such
shareholders without a meeting. These
<PAGE>

-23-

DATED: JULY 24, 1996

By-Laws may be ratified, amended or repealed and any new By-Law may be adopted
by a majority of the entire Board of Directors at any duly held meeting;
provided that any By-Laws so ratified, amended or adopted by said majority may
be amended or repealed, and any By-Law repealed by the Board of Directors may be
reinstated, by a majority of the shareholders of the Corporation entitled to
vote at the time for the election of directors.

<PAGE>

EXHIBIT 10.2
------------

EMPLOYMENT AGREEMENT

This EMPLOYMENT AGREEMENT is dated as of May 31, 1996 (this
"Employment Agreement") between Influence, Inc., a Delaware corporation (the
"Company"), and Peter A. Bick (the "Executive").

W I T N E S S E T H:
- - - - - - - - - -

WHEREAS, the Executive has been employed by the Company prior to the
date hereof and has provided valuable services to the Company and its subsidiary
in the development and organization of its business and affairs;

WHEREAS, the Company has agreed to employ the Executive in an
executive capacity, and desires to be assured of his continued services as such,
on the terms and conditions set forth in this Agreement; and

WHEREAS, the Executive accepts such employment on the terms and
conditions set forth in this Agreement.

NOW, THEREFORE, in consideration of the mutual covenants and
agreements hereinafter set forth, and intending to be legally bound, the Company
and the Executive confirm the terms of the Executive's employment and agree as
follows:
<PAGE>

1. EMPLOYMENT.
----------

(a) Responsibilities. The Company employs the Executive as the President
----------------
and Chief Executive Officer of the Company and in such capacity the Executive
shall have such responsibilities and duties consistent with his executive
position and of such a nature as are usually associated with the position of an
executive officer as may be designated from time to time by the Board of
Directors of the Company (the "Board").

(b) Performance. The Executive accepts such employment and agrees to
-----------
discharge his duties hereunder faithfully and diligently and use his best
efforts to implement the policies established by the Board. The Executive shall
devote substantially his full business time to the business and affairs of the
Company and he will not, during the Employment Term, devote any of his business
time to the performance of services for remuneration to others than the Company,
except as expressly contemplated by this Section 1 below or with the prior
written consent of the Company. The Executive shall be entitled to fulfill his
teaching obligation through the end of 1996, to serve as an outside director of
no more than two companies (other

- 2 -
<PAGE>

than the Company), which shall not be public companies, and to undertake such
other activities (not including the performance of services for remuneration to
others than the Company) that may entail an insubstantial portion of his
business time, provided that such services and other activities shall not
interfere or conflict in any material respect with the performance of any of the
Executive's duties as a director and employee of the Company and that the
Executive shall have disclosed such services and other activities to the Company
in advance.

(d) Director. During the Employment Term, the Company agrees to use its
--------
best efforts to cause the Executive to be appointed as a member of the Board.

2. TERM OF EMPLOYMENT. The Company employs the Executive, and the
------------------
Executive accepts such employment, for a term commencing on the date hereof and
ending on May 31, 1999 or such earlier date that

- 3 -
<PAGE>

the employment of the Executive is sooner terminated pursuant to Section 4
hereof (the "Employment Term").

3. COMPENSATION; BENEFITS; EXPENSE REIMBURSEMENT.
---------------------------------------------

(a) Base Salary. The Company shall pay to the Executive so long as he
-----------
shall be employed hereunder a base salary (subject to applicable withholding of
income taxes, social security taxes, and other deductions) at the annual rate of
one hundred and fifty thousand dollars ($150,000) or such greater amount as may
be approved by the Board in its sole discretion, payable in accordance with the
payroll policy of the Company as in effect from time to time.

(b) Bonus Compensation. The Company shall pay to the Executive so long
------------------
as he shall be employed hereunder an annual bonus (based on a percentage of the
Executive's annual base salary and earned based on the attainment of certain
performance criteria established from time to time by the Board and the
Executive). Such annual bonus shall be payable in accordance with the policies
established by the Board.

- 4 -
<PAGE>

(c) Business Expenses. The Company shall pay or reimburse the Executive
-----------------
for all reasonable expenses actually incurred or paid by him in the performance
of his services under this Agreement, upon presentation of expense statements or
vouchers or other supporting information as the Company may reasonably require.

(d) Automobile Allowance. During the Employment Term, the Executive
--------------------
shall receive an automobile allowance of $400 per month (plus reimbursement of
parking costs at a parking garage located near the Executive's office), which
shall be paid in addition to the Executive's base salary.

(e) Vacation. The Executive shall be entitled to annual vacation of four
--------
(4) weeks per year. Any unused vacation in one year may be carried over to the
next year unless the Company shall elect to pay the Executive (based on the
Executive's annual salary) for such unused vacation.

(f) Other Benefits. During the Employment Term, the Executive shall be
--------------
entitled to receive health and dental coverage for the Executive and his
immediate

- 5 -
<PAGE>

family in accordance with the programs maintained by the Company and made
available to employees generally. The Company shall also maintain a term life
insurance policy in the benefit amount of $250,000 covering the Executive for
the benefit of the Executive or his designated beneficiaries. The Executive
shall also be entitled to participate in all employee benefit plans, practices
and programs maintained by the Company and made available to employees (or to
all executives) generally and which are of a character different than the plans,
practices and programs specifically contemplated for the Executive under this
Agreement. The Company also will provide to the Executive customary
indemnification rights to the fullest extent permitted under Delaware law and
may obtain officers and directors insurance in connection with any public
offering of securities of the Company provided that such insurance is available
to the Company on commercially reasonable terms.

4. TERMINATION.
-----------
(a) Termination for Cause. Notwithstanding the provisions of Section 2
---------------------
hereof, the obligations of the Company hereunder and the employment of the
Executive

- 6 -
<PAGE>

hereunder shall be (in the case of subparagraph (1) below) or may be (in the
case of subparagraphs (2) and (3) below) terminated by the Company on the
earliest of the following events:

1. Death. The date of the death of the Executive.

2. Incapacity. Thirty days (30) after the date on which the Company
shall have given the Executive notice of termination of his employment
hereunder by reason of his physical or mental incapacity on a permanent
basis. The Executive shall be deemed to be physically or mentally
incapacitated on a permanent basis if the Executive is unable, by reason
of any physical or mental incapacity, for a period of 90 days (whether
or not consecutive) during any 12-month period to perform his duties and
responsibilities hereunder in a reasonably satisfactory manner.

3. For Cause. Upon notice in writing to the Executive, "for cause",
which shall mean

(A) the commission by the Executive of a willfully wrongful act
or grossly negligent act (which may include, without limitation, a
breach of fiduciary duty) that is materially detrimental to the
Company or its subsidiaries;

(B) the commission or perpetration by the Executive of any
criminal act (other than a traffic offense) to which the Executive
has pled guilty, entered a nolo contendere plea or of which the
Executive has otherwise been convicted, and that is materially
detrimental to the Company or its subsidiaries;

- 7 -
<PAGE>

(D) any material violation by the Executive of his obligations
under this Employment Agreement or any violation by the Executive of
his obligations under Section 6 hereof, which violation continues
uncured for ten days following written notice to the Executive.

(b) Compensation upon Termination for Cause. In the event that the
---------------------------------------
employment of the Executive is terminated pursuant to Section 4(a) hereof, (i)
the Executive shall thereupon be released from any further obligations under
Section 1 hereof, (ii) the Company shall thereupon be released from any further
obligations under this Employment Agreement other than those accruing under this
Agreement through the date of termination of the Executive's employment
hereunder, including accrued but unused vacation, and other than the Company's
obligations in respect of vested stock options described hereunder, and (iii)
all options to purchase shares of Common Stock that have not previously vested
shall be cancelled by the Company and the Executive shall not have any further
rights in such options or the underlying shares of Common Stock. Termination
pursuant to Section 4(a) shall in no way abrogate or relieve the Executive of
his obligations under Section 6 hereof.

- 8 -
<PAGE>

(c) Termination Without Cause. The Company may terminate the
-------------------------
Executive's employment hereunder other than for the reasons set forth in
paragraph (a) at any time upon ten days prior written notice to Executive. In
consideration of such termination, the Company agrees (1) to pay to the
Executive the base salary payable to Executive for a period of six months, (2)
to pay the Executive the cost of continuing health coverage under COBRA for the
next succeeding six months, and (3) the next succeeding vesting date for stock
options granted under Section 5 shall be accelerated to the date of such
termination. For purposes of this Section (c), any breach by the Company of
Section 1(c) of this Agreement shall be deemed a termination of the Executive by
the Company without cause.

(d) Change in Control.
-----------------

(i) Subject to Section 4(d)(iii) below and after taking into account any
vesting of options pursuant to Section 4(c) above, in the event of a "change in
control" of the Company (as defined in Section 4(d)(ii) below), any stock
options granted pursuant to Section 5 that have not yet vested will vest and
become immediately exercisable upon the earliest to occur of

- 9 -
<PAGE>

the following: (A) termination of the Executive's employment at any time after
such change in control for any reason other than voluntary resignation or (B)
voluntary resignation by the Executive for any reason at any time within 13
months after such change in control.

(ii) For purposes of this Agreement a "change in control" shall have
occurred upon (1) the acquisition after the date hereof of fifty percent (50%)
or more of the Common Stock of the Company by any "person" or "group" (which
terms shall have the meanings set forth in Section 13(d) of the Securities
Exchange Act of 1934, as amended) that does not currently own at least (10%) of
the outstanding Common Stock of the Company, (2) the sale of substantially all
the assets of the Company and its subsidiaries to another company, the majority
shareholders of which do not constitute majority shareholders of the Company, or
(3) the consummation of a merger, consolidation or reorganization involving the
Company, unless the shareholders of the Company immediately before such merger,
consolidation or reorganization, own directly or indirectly immediately
following such merger,

- 10 -
<PAGE>

consolidation or reorganization, at least 50% of the combined voting power of
the outstanding voting securities of the corporation resulting from such merger,
consolidation or reorganization.

(iii) The provisions of Section 4(d)(i) above will not be effective
until the earlier of: (A) the Company obtains approval of such Section 4(d)(i)
from the holders of at least 75% of the Company's outstanding voting stock in
accordance with Section 280G(b)(5) of the Internal Revenue Code or (B) the
Company has an initial public offering. The Company will use its best efforts
to obtain such stockholder approval as soon as reasonably practicable.

5. STOCK OPTIONS.
-------------

(a) Grant of Stock Options. As an inducement to the Executive to become
----------------------
an employee of the Company and as an incentive for future performance by the
Executive of his duties hereunder, the Company grants the Executive stock
options for 190,000 shares of Common Stock, each such option exercisable at an
exercise price of $5.00 per share of Common Stock, subject to the vesting
schedule and on the other terms

- 11 -
<PAGE>

and conditions described below. Stock options granted hereunder which have
vested in accordance with the terms of this Agreement prior to or on the date of
the termination of the Executive's employment hereunder shall expire upon the
earlier of (1) three months after the date of termination of the Executive's
employment with the Company for any reason, or (2) ten years after the date
hereof.

(b) Exercise of Stock Options. Subject to the vesting schedule
-------------------------
described below, vested stock options may be exercised at any time, in whole or
in part, by the Executive by delivering to the Company a notice of exercise in
form reasonably satisfactory to the Company accompanied by the payment of the
exercise price (together with any withholding taxes required to be withheld by
the Company) for the options covered by the notice of exercise. Payment of the
exercise price (and any applicable withholding taxes) shall be made in cash or,
from and after the completion of the Company's initial public offering, may be
made using a "cashless exercise" feature that enables the Executive to pay the
exercise price of vested stock options by directing the Company to withhold and
retain a number of the shares

- 12 -
<PAGE>

of Common Stock issuable on exercise of the stock option with a value (based on
the Fair Market Value (as defined below) of the Common Stock at the time of
exercise)) equal to the aggregate exercise price of the options being exercised.
For purposes of this Section 5(b) the term "Fair Market Value" of a share of
Common Stock of the Company shall mean, as of any date of determination, the
last closing price for a share of the Company's Common Stock as quoted on the
NASDAQ National Market or otherwise in the over-the-counter market.

(c) Vesting Schedule. The stock options granted to the Executive under
----------------
paragraph (a) above shall be subject to the following vesting schedule (as the
same may be modified pursuant to Sections 4(c) and 4(d)): (1) 85,000 stock
options shall vest immediately, as of the date hereof; (2) 35,000 shall vest on
May 31, 1997; (3) 35,000 shall vest on May 31, 1998; and (4) 35,000 shall vest
on May 31, 1999. The stock options granted hereunder shall only become
exercisable upon vesting in accordance with the above schedule and in accordance
with Sections 4(c) or 4(d). Stock options that have not vested on or before the

- 13 -
<PAGE>

date of the termination of the Executive's employment with the Company shall be
cancelled with no further rights associated therewith.

(d) Nontransferability. Stock options granted hereunder shall not be
------------------
transferable otherwise than (a) by will or the laws of descent and distribution,
(b) pursuant to a qualified domestic relations order as defined in Section
414(p) of the Internal Revenue Code of 1986, as amended, or (c) to the
Executive's spouse, children, parents, siblings, or any trust established for
the benefit of the Executive or such persons.

(e) Capital Adjustments. The number and class of shares of Common Stock
-------------------
subject to each outstanding option granted hereunder, the option exercise price
and the aggregate number and class of shares of Common Stock for which the stock
option granted hereunder may be exercised shall be subject to such adjustment,
if any, as appropriate to reflect such events as stock dividends, stock splits
or recapitalizations by or of the Company.

- 14 -
<PAGE>

(f) Restriction on Shares of Common Stock Issued Upon Exercise.
-----------------------------------------------------------
Notwithstanding any other provision of this Agreement, the Executive agrees, for
himself and his successors, that upon the issuance of any shares of Common Stock
upon the exercise of any stock options granted hereunder, the Executive will not
sell, pledge or otherwise dispose of such shares of Common Stock so issued
unless and until the Company is furnished with an opinion of counsel to the
effect that registration of such shares pursuant to the Securities Act of 1933,
as amended (the "Act"), is not required by that Act and the rules and
regulations thereunder. The Executive further agrees that the Company may place
a legend embodying such restriction on the certificates evidencing such shares.
In addition, the Executive agrees not to sell any shares of Common Stock
issuable on exercise of any stock options until the expiration of the "lock-up"
period agreed to by the Company with the underwriters in connection with the
initial public offering of the Company's Common Stock. In addition, the
Executive agrees that the Board may adopt from time to time reasonable
restrictions applicable to the sale of shares of Common Stock by officers and
directors of the Company, including the Executive.

- 15 -
<PAGE>

(g) Rights as Stockholder. The Executive shall have no rights as a
---------------------
stockholder with respect to any shares of Common Stock subject to the stock
options granted hereunder until and unless such options have been validly
exercised and the shares covered by such options are issued to the Executive
pursuant to this Agreement. Without limiting the generality of the foregoing,
no adjustment shall be made for dividends or other rights for which the record
date is prior to the issuance of shares on exercise of the stock options. The
Company will issue a certificate evidencing shares issuable upon exercise of the
stock options promptly following the valid exercise of stock options by the
Executive.

6. NON-COMPETITION; CONFIDENTIALITY; DISCLOSURE OF INFORMATION.
-----------------------------------------------------------

(a) Non-Competition. Without the prior written consent of the Board,
---------------
the Executive shall not, directly or indirectly, during the Employment Term and
until the second anniversary of the termination of the Employment Term.

1. render consulting, or advisory services to or financially support
in any manner, or be a proprietor, a director, an officer, an employee,
an agent, a partner, a shareholder (other than ownership of less than two
(2%) percent of the outstanding voting securities of any entity whose
voting securities are traded on a national

- 16 -
<PAGE>

securities exchange (including NASDAQ); provided that any of the other
--------
restrictions contained in this sentence are not applicable) or a lender
to, or otherwise promote, any business, enterprise, person, firm,
corporation, partnership, association or other entity that competes
anywhere in the world with the Company or any of its subsidiaries in the
business of the manufacture, distribution, design or sale of such
products of the general type that the Company (including its
predecessors) or its subsidiaries manufacture, distribute, design or sell
during the Employment Term or which the Company (including its
predecessors) or its subsidiaries is planning the manufacture,
distribution, design or sale;

2. interfere with, disrupt or attempt to disrupt existing or any
then existing relationship, contractual or otherwise, between the Company
or its subsidiaries and any of their customers, suppliers, clients,
executives, employees or other persons with whom the Company or its
subsidiaries deal; or

3. solicit for employment, attempt to employ or assist any other
entity in employing or soliciting for employment any employee or
executive who is at that time employed by the Company or its
subsidiaries.

(b) Confidentiality. The Executive shall not, directly or indirectly,
---------------
without the specific prior written consent of the Company, at any time after the
date hereof, divulge to any business, enterprise, person, firm, corporation,
partnership, association or other entity, or use for the Executive's own
benefit, (i) any confidential information concerning the businesses, affairs,
customers, suppliers or clients of

- 17 -
<PAGE>

the Company or its subsidiaries or their affiliates, or (ii) any non-public data
or statistical information of the Company or its subsidiaries or their
affiliates, whether created or developed by the Company or its subsidiaries or
their affiliates or on their behalf or with respect to which the Executive may
have knowledge or access (including without limitation any of the foregoing
created or developed by the Executive), it being the intent of the Company and
the Executive to restrict the Executive from disseminating or using any data or
information which is at the time of such use or dissemination unpublished and
not readily available or generally known to persons involved or engaged in
businesses of the type engaged in from time to time by the Company or its
subsidiaries.

(c) Non-Disclosure. The Executive will promptly disclose to the Company
--------------
all processes, trademarks, inventions, improvements, discoveries and other
information related to the business of the Company, its subsidiaries or their
affiliates (collectively "developments") conceived, developed or acquired by
him alone or with others during the Employment Term, whether or not conceived
during regular working hours

- 18 -
<PAGE>

or through the use of Company or subsidiary time, material or facilities or
otherwise. All such developments shall be the sole and exclusive property of
the Company, and upon request the Executive shall deliver to the Company all
drawings, sketches, models, codes, data and records relating to such
developments. In the event any such developments shall be deemed by the Company
to be patentable, the Executive shall, at the expense of the Company (which
shall, in the event the Executive shall no longer be employed hereunder, include
compensation to the Executive at a rate equal to his base salary prorated for
the time involved), assist the Company in obtaining a patent or patents thereon
and execute all documents and do all other things necessary or proper to obtain
letters patent and to vest the Company with full title and rights thereto.

(d) Restrictions on Scope of Agreement. Although the restrictions
----------------------------------
contained in Section 6 hereof are considered by the parties hereto to be fair
and reasonable in the circumstances, it is recognized that restrictions of the
nature contained in Section 6 may fail for technical reasons, and accordingly if
any of such restrictions shall be adjudged by a court of

- 19 -
<PAGE>

competent jurisdiction to be void or unenforceable for whatever reason, but
would be valid if part of the wording thereof were deleted, or the period
thereof reduced or the area dealt with thereby reduced in scope, the
restrictions contained in Section 6 shall apply, at the election of the Company,
with such modifications as may be necessary to make them valid, effective and
enforceable in the particular jurisdiction in which such restrictions are
adjudged to be void or unenforceable.

(e) Successors. The covenants contained in this Section 6 shall inure
----------
to the benefit of the Company, any successor of the Company and each subsidiary
of the Company.

7. MISCELLANEOUS.
-------------

(a) Entire Agreement. This Employment Agreement contains the entire
----------------
agreement between the Company and the Executive with respect to the matters
covered by this Employment Agreement and supersedes all prior arrangements or
understandings with respect thereto.

- 20 -
<PAGE>

(b) Assignment. This Employment Agreement may be assigned by the
----------
Company to any business, enterprise, person, firm, corporation, partnership,
association or other entity acquiring (by purchase, merger or otherwise),
directly or indirectly, the business and substantially all of the assets of the
Company or of the subsidiaries of the Company. Notwithstanding the foregoing,
any assignment permitted under this Section 7(b) shall not affect the
acceleration of the stock options vesting schedule upon the occurrence of a
Change of Control.

(c) Governing Law. This Employment Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of California without giving
effect to the conflict of law principles thereof.

(d) Headings. The descriptive headings used in this Employment
--------
Agreement are for convenience only and shall not control or affect the meaning
or construction of any provision of this Employment Agreement.

(e) Notices. All notices or other communications which are required or
-------
permitted pursuant

- 21 -
<PAGE>

to this Employment Agreement shall be in writing and sufficient if delivered
personally or by telecopier (with a confirmation copy sent by mail) or sent by
registered or certified mail, postage prepaid, addressed as follows:

If to the Company:

Influence, Inc.
601 Montgomery Street
Suite 845
San Francisco, California 94111
Attention: Lewis C. Pell
Telephone Number: (415) 421-5600

with a copy to:

Paul I. Rachlin
Arnold & Porter
399 Park Avenue
New York, New York 10022

If to the Executive:

Mr. Peter A. Bick
637 Steiner Street
San Francisco, California 94117

Any party may by written notice change the address to which notices to such
party are to be delivered or mailed.

(f) Waiver. Any waiver of any term or condition, or any amendment or
------
supplementation, of this Employment Agreement shall be effective only if in
writing and, in the case of any waiver by the Company

- 22 -
<PAGE>

and any amendment or supplementation consented to by the Company, if approved by
the Chairman or the Board.

(g) Performance by Executive. The performance by the Executive of his
------------------------
duties under this Employment Agreement is the personal obligation of the
Executive and may not be delegated by the Executive; however, the Executive may
delegate duties and responsibilities to other employees or agents of the Company
or its subsidiaries incident to normal and customary management practices.

(h) Remedies. If a violation by the Executive of any covenant contained
--------
in this Employment Agreement occurs or is threatened, the Company and the
Executive agree and acknowledge that such violation or threatened violation will
cause irreparable injury to the Company and its subsidiaries, and the remedy at
law for any such violation or threatened violation shall be inadequate and that
the Company shall be entitled to temporary and permanent injunctive relief
without the necessity of proving actual damages.

- 23 -
<PAGE>

(i) Legal Expenses. The Company shall reimburse the Executive for the
--------------
Executive's reasonable legal fees and expenses in negotiating and documenting
this Agreement.

* * * * *

- 24 -
<PAGE>

IN WITNESS WHEREOF, the Company and the Executive have executed and
delivered this Employment Agreement on and as of the date first above written.

INFLUENCE, INC.

By: /s/ Lewis C. Pell
-----------------
Name: Lewis C. Pell
Title: Chairman of the Board

/s/ Peter A. Bick
-----------------
Peter A. Bick

- 25 -

<PAGE>

EXHIBIT 10.3

PROMISSORY NOTE
---------------

$1,000,000.00 New York, New York
June 10, 1996

FOR VALUE RECEIVED, the undersigned INFLUENCE, INC., a Delaware
corporation (hereinafter called the "Borrower"), promises to pay to the
order of LEWIS C. PELL (hereinafter called the "Lender"), or registered
assigns, the principal amount of One Million Dollars ($1,000,000.00), and
to pay interest on the unpaid principal amount hereof, (and, to the extent
permitted by applicable law, any overdue payment of interest), for the
period commencing on the date hereof through and including the date the
principal amount hereof shall be paid in full, such interest to accrue
daily and be payable together with the principal amount at any time at the
option of the Borrower, but in no event later than June 10, 1998, (or, if
such date is not a banking day in New York, New York, on the next
succeeding banking day with interest accruing to such next succeeding
banking day), at a rate per annum, computed on the basis of a 360-day year
and actual days elapsed, equal to the "Applicable Federal rate" on the date
hereof, as defined in Treas. Reg. Section 1.482-2(a)(1)(iv)(C).

1. Successors and Assigns. The terms of this Note shall be
----------------------
binding upon and inure to the benefit of and be enforceable by the
respective successors and permitted assigns of the Borrower and the Lender,
whether so expressed or not, and, in particular, shall inure to the benefit
of and be enforceable by any holder or holders of this Note.

2. Modifications and Amendments. No modification, rescission,
----------------------------
waiver, forbearance, release or amendment of any provision of this Note
shall be made, except by a written agreement duly executed by the Borrower
and the Lender.

3. Governing Law. This Note shall be governed by, and construed
-------------
and interpreted in accordance with, the laws of the State of New York,
without regard to principles of conflicts of laws (other than Section 5-
1401 of the New York General Obligations Law), as to all matters,
including, but not limited to, matters of
<PAGE>

validity, construction, effect, performance and remedies.

4. Lost, Mutilated or Stolen Note. Upon receipt of evidence
------------------------------
reasonably satisfactory to the Borrower of the loss, theft, destruction or
mutilation of this Note and, in the case of any such mutilation, upon the
surrender of this Note for cancellation to the Borrower at its principal
office, the Borrower will execute and deliver, in lieu thereof, a new Note
of like tenor containing the same subordination and other terms as this
Note, dated so that there will be no loss of interest on such lost, stolen,
destroyed or mutilated Note. Any Note in lieu of which any such new Note
has been so executed and delivered by the Borrower shall not be deemed to
be an outstanding Note for any purpose.

5. Headings. Paragraph headings used in this Note are for
--------
convenience of reference only, are not part of this Note and are not to
affect the construction of, or to be taken into consideration in
interpreting, this Note.

6. Severability. If any provision of this Note is held by a
------------
court of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the provisions of this Note shall remain in full force and
effect.

IN WITNESS WHEREOF, the undesigned parties hereto have caused
this Note to be executed by their respective officers thereunto duly
authorized as of the date first above written.

INFLUENCE, INC.

By: /s/ Oren Globerman
------------------

Name: Oren Globerman
--------------------

Title: Vice Chairman
--------------------

-2-
<PAGE>

PROMISSORY NOTE
---------------

$1,000,000.00 New York, New York
August 14, 1996

FOR VALUE RECEIVED, the undersigned INFLUENCE, INC., a Delaware
corporation (hereinafter called the "Borrower"), promises to pay to the
order of LEWIS C. PELL (hereinafter called the "Lender"), or registered
assigns, the principal amount of One Million Dollars ($1,000,000.00), and
to pay interest on the unpaid principal amount hereof, (and, to the extent
permitted by applicable law, any overdue payment of interest), for the
period commencing on the date hereof through and including the date the
principal amount hereof shall be paid in full, such interest to accrue
daily and be payable together with the principal amount at any time at the
option of the Borrower, but in no event later than August 14, 1998, (or, if
such date is not a banking day in New York, New York, on the next
succeeding banking day with interest accruing to such next succeeding
banking day), at a rate per annum, computed on the basis of a 360-day year
and actual days elapsed, equal to the "Applicable Federal rate" on the date
hereof, as defined in Treas. Reg. Section 1.482-2(a)(1)(iv)(C).

validity, construction, effect, performance and remedies.

IN WITNESS WHEREOF, the undesigned parties hereto have caused
this Note to be executed by their respective officers thereunto duly
authorized as of the date first above written.

INFLUENCE, INC.

By: /s/ Peter A. Bick
--------------------

Name: Peter A. Bick
--------------------

Title: President and Chief
Executive Officer

-2-

<PAGE>

EXHIBIT 10.5

INFLUENCE, INC.
601 MONTGOMERY STREET, SUITE 845
SAN FRANCISCO, CALIFORNIA 94111

July 1, 1996

Oren Globerman
14 Jericho Street
Holon, Israel

Dear Mr. Globerman:

This letter (the "Letter" or "Agreement") establishes certain points of
agreement between you and Influence, Inc., a Delaware corporation (the
"Company"), regarding your relationship with the Company and its subsidiary.

1. Confidentiality. You acknowledge that you will not, directly or
---------------
indirectly, without the specific prior written consent of the Company, at any
time after the date hereof, divulge to any business, enterprise, person, firm,
corporation, partnership, association or other entity, or use for your own
benefit, (i) any confidential information concerning the businesses, affairs,
customers, suppliers or clients of the Company, its subsidiaries or their
affiliates (including, but not limited to, trade secrets, know-how, proprietary
information regarding the Company's Products (as such term is defined below),
inventions, formulae, manufacturing methods, processes, specifications,
laboratory protocols, business plans or strategy and non-public lists of clients
and suppliers), or (ii) any non-public data or statistical information of the
Company, its subsidiaries or their affiliates, whether created or developed by
the Company, its subsidiaries or their affiliates or on their behalf or with
respect to which you may have knowledge or access (including without limitation
any of the foregoing created or developed by you), it being the intent of the
Company and you to restrict you from disseminating or using any data or
information which is at the time of such use or dissemination unpublished and
not readily available or generally known to persons involved or engaged in
businesses of the type engaged in from time to time by the Company or its
subsidiaries.

2. Non-Competition. From and after the date hereof until the second
---------------
anniversary of the date on which you cease to serve as an employee or consultant
<PAGE>

Oren Globerman
July 1, 1996
Page 2

of the Company or any of its subsidiaries, you will not either alone or through
or in any capacity with another legal entity, directly or indirectly, (a) render
consulting, or advisory services to or financially support in any manner, or be
a proprietor, a director, an officer, an employee, an agent, a partner, a
shareholder (other than ownership of less than two (2%) percent of the
outstanding voting securities of any entity whose voting securities are traded
on a national securities exchange (including NASDAQ); provided that any of the
--------
other restrictions contained in this sentence are not applicable) or a lender
to, or otherwise promote, any business, enterprise, person, firm, corporation,
partnership, association or other entity that competes directly or indirectly
anywhere in the world with the Company or any of its subsidiaries in the
business of the manufacture, distribution, design or sale of such products of
the type that the Company (including its predecessors) or its subsidiaries
manufacture, distribute, design or sell during the term of your service to the
Company or which the Company (including its predecessors) or any of its
subsidiaries is planning during the term of your service to the Company
hereunder the possible manufacture, distribution, design or sale (the "Company's
Products", except that such definition shall not include stents and stent
delivery systems); (b) interfere with, disrupt or attempt to disrupt existing or
any then existing relationship, contractual or otherwise, between the Company or
its subsidiaries and any of their customers, suppliers, clients, executives,
employees or other persons with whom the Company or its subsidiaries deal; or
(c) employ, solicit for employment, attempt to employ or assist any other entity
in employing or soliciting for employment any employee or executive who is at
that time employed by the Company or its subsidiaries.

3. Release. You hereby remise, release, convey and relinquish unto the
-------
Company, its successors and assigns, forever all the right, title and interest
which you or your affiliates (including entities you control or in which you
have a controlling interest) may have, if any, in, to or arising out of any
inventions (whether patentable or unpatentable, whether or not reduced to
practice, and including trade secrets), any improvements thereto, and any
patents, patent applications and patent disclosures, together with any re-
issuances, continuations, continuations in part, divisionals, revisions,
extensions and re-
<PAGE>

Oren Globerman
July 1, 1996
Page 3

examinations thereof, whether in the United States or abroad, relating to the
Company's Products, including any right to any remuneration (other than any
remuneration actually paid to you or your affiliates prior to the date hereof)
in respect of the foregoing or otherwise in respect of prior services you have
rendered to the Company or its subsidiaries. You agree to make prompt written
disclosure to the Company of, to hold in trust for the sole right and benefit of
the Company, and will and hereby do assign to the Company all right, title and
interest in and to any ideas, inventions, developments, improvements or trade
secrets related to the Company's Products which you may solely or jointly
conceive or reduce to practice, or cause to be conceived or reduced to practice
during the period contemplated by section 4 hereof. You agree to take such
other actions, provide such other assurances and execute such other instruments
and assignments that the Company may reasonably request in order to give effect
to this Section 3.

4. Compensation. Effective July 1, 1996 and so long as you shall be an
------------
officer of the Company or its subsidiary or performing substantial services to
the Company or its subsidiaries, the Company will cause its subsidiary,
Influence Medical Technologies, Ltd. ("IMT") to pay to you a salary or fee of
$150,000 per annum, payable in equal monthly installments in accordance with the
IMT's payroll practices, payable in New Israeli Shekels and subject to any
withholdings required to be made by applicable law. You agree to devote to the
Company and to its subsidiaries such of your business time as is necessary for
the management of the business and affairs of the Company and its subsidiaries.

5. Remedies. The Company shall have the right to enforce this Agreement
--------
and any of its provisions by injunction, specific performance or other equitable
relief, without bond. The foregoing rights of the Company are in addition to
and shall not derogate from any other rights the Company may have for a breach
of this Agreement.

6. Severability and Enforcement. In the event that any provision in this
----------------------------
Agreement is held unenforceable in a court of law, it shall not be deemed to
void this Agreement as a whole and the remaining provisions shall be unaffected
thereby.
<PAGE>

Oren Globerman
July 1, 1996
Page 4

7. Delay, Omission or Waiver. No delay or Omission of the Company to
-------------------------
exercise any right, power or remedy accruing to the Company under this Agreement
shall impair any such right, power or remedy, nor shall it be construed to be a
waiver of any breach or default; nor shall any waiver by the Company of any
single breach or default on your behalf be deemed a waiver of any other breach
or default on your behalf theretofore or thereafter occurring.

8. Governing Law. This Agreement will be governed by the laws of the
-------------
State of New York, without giving effect to the conflict of law rules thereof.

* * *

This Agreement constitutes the entire agreement between you and the Company
and supersedes all prior understandings or agreements with respect to the
subject matter hereof. This Agreement may not be assigned by the parties
hereto, except that the rights and benefits inuring to the Company hereunder
shall also inure to the benefit of the Company's subsidiaries and their
successors and assigns.

You represent that this agreement does not in any way conflict with any
other agreement or commitment undertaken by you at this time which could
prohibit or impair the performance of your obligations hereunder.

Kindly acknowledge your agreement with the terms of this letter by signing
in the space provided below and returning this letter to me.

Sincerely,

INFLUENCE, INC.

By:/s/ Peter A. Bick
--------------------
Name: Peter A. Bick
Title: President

AGREED AND ACCEPTED
as of this 1st day of
July, 1996

/s/ Oren Globerman
- ------------------
Oren Globerman

<PAGE>

EXHIBIT 10.6

INFLUENCE, INC.
601 MONTGOMERY STREET, SUITE 845
SAN FRANCISCO, CALIFORNIA 94111

July 1, 1996

Mordechay Beyar, M.D.
5 Ha'Eshcolit Street
PO Box 1455
Caesaria, Israel 38900

Dear Dr. Beyar:

2. Non-Competition. From and after the date hereof until the second
---------------
anniversary of the date on which you cease to serve as an employee or consultant
<PAGE>

Mordechay Beyar, M.D.
July 1, 1996
Page 2

Mordechay Beyar, M.D.
July 1, 1996
Page 3

part, divisionals, revisions, extensions and re-examinations thereof, whether in
the United States or abroad, relating to the Company's Products, including any
right to any remuneration (other than any remuneration actually paid to you or
your affiliates prior to the date hereof) in respect of the foregoing or
otherwise in respect of prior services you have rendered to the Company or its
subsidiaries. You agree to make prompt written disclosure to the Company of, to
hold in trust for the sole right and benefit of the Company, and will and hereby
do assign to the Company all right, title and interest in and to any ideas,
inventions, developments, improvements or trade secrets related to the Company's
Products which you may solely or jointly conceive or reduce to practice, or
cause to be conceived or reduced to practice during the period contemplated by
section 4 hereof. You agree to take such other actions, provide such other
assurances and execute such other instruments and assignments that the Company
may reasonably request in order to give effect to this Section 3.

6. Severability and Enforcement. In the event that any provision in this
----------------------------
Agreement is held unenforceable in a court of law, it shall not be deemed
<PAGE>

Mordechay Beyar, M.D.
July 1, 1996
Page 4

to void this Agreement as a whole and the remaining provisions shall be
unaffected thereby.

8. Governing Law. This Agreement will be governed by the laws of the
-------------
State of New York, without giving effect to the conflict of law rules thereof.

* * *

Kindly acknowledge your agreement with the terms of this letter by signing
in the space provided below and returning this letter to me.

Sincerely,

INFLUENCE, INC.

By:/s/ Peter A. Bick
--------------------
Name: Peter A. Bick
Title: President

AGREED AND ACCEPTED
as of this 1st day of
July, 1996

/ss/ Mordechay Beyar
- ---------------------
Mordechay Beyar, M.D.

<PAGE>

EXHIBIT 10.7
------------

INFLUENCE, INC.
1995 Stock Option Plan

1. DEFINITIONS
-----------

In this Plan, except; where the context otherwise indicates, the
following definitions apply:

(a) "Agreement" means the written agreement implementing a grant of an
Option or an award of Restricted Stock.

(b) "Board" means the Board of Directors of the Company.

(d) "Committee" means the committee of the Board meeting the standards
of Rule 16b-3(c)(2)(i) of the Rules and Regulations under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or any similar successor
rule, appointed by the Board to administer this Plan. Unless otherwise
determined by the Board, the Compensation Committee of the Board or the Board as
a whole shall be the Committee.

(e) "Common Stock" means the common stock, par value $0.001 per share,
of the Company.

(f) "Company" means Influence, Inc., a Delaware corporation.

(g) "Date of Exercise" means the date on which the Company receives
notice pursuant to Section 7(a) of the exercise of an Option.

(h) "Date of Grant" means the date on which an Option is granted or an
award of Restricted Stock is authorized by the action of the Committee or such
later date as may be specified in the grant or authorization.

(i) "Director" means any person who is a director of the Company or any
Subsidiary.

(j) "Director-employee" means an Employee who is also a Director of the
Company.

<PAGE>

Exhibit 11.1

INFLUENCE INC. AND SUBSIDIARY
STATEMENT OF COMPUTATION OF LOSS PER SHARE
<TABLE>
<CAPTION>

November 9,
1994
(inception) Six months ended
through Year ended June 30,
December 31, December 31, --------------------
1994 1995 1995 1996
------------ ----------- --------------------
<S> <C> <C> <C> <C>
Primary:
- -------
Net loss $ (300,000) $ (1,697,496) $ (518,931) $ (1,464,631)
=========== ============ ========== ==========
Weighted average number of
common shares outstanding 4,054,750 4,021,216 4,054,750 3,934,750
=========== ============ ========== ==========

Net loss per share $ (0.07) $ (0.42) $ (0.13) $ (0.37)
=========== ============ ========== ==========

Fully Diluted:
Net loss $ (300,000) $ (1,697,496) $ (518,931) $ (1,464,631)
=========== ============ ========== ==========
Weighted average number of
common shares outstanding 4,054,750 4,021,216 4,054,750 3,934,750

Weighted average number
of shares issuable upon
exercise of outstanding options - 84,056 42,383 231,012

Weighted average number
of shares issuable upon
assumed conversion of
Series A preferred stock - 268,537 63,829 713,000

Shares assumed to be
repurchased under the
treasury stock method - * * *
=========== ============ ========== ==========
4,054,750 * * *
=========== ============ ========== ==========
Net loss per share $ (0.07) $ * * *
=========== ============ ========== ==========

</TABLE>

* To be provided by amendment.

<PAGE>

Exhibit 11.2

INFLUENCE INC. AND SUBSIDIARY
PRO FORMA STATEMENT OF COMPUTATION OF LOSS PER SHARE

<TABLE>
<CAPTION>
Six months
Year ended ended
December 31, June 30,
1995 1996
------------ -------------
Pro forma in accordance with
- ----------------------------
the Securities and Exchange
---------------------------
Commission Staff Accounting
---------------------------
Bulletin No. 64
---------------
<S> <C> <C>
Net loss $ (1,697,496) $ (1,464,631)
============ =============
Weighted average number of
common shares outstanding 4,021,216 3,934,750

Shares issuable upon exercise
of outstanding options 391,750 391,750

Shares issuable upon assumed
conversion of Series A
preferred stock 713,000 713,000

Shares assumed to be repurchased
under the treasury stock method * *
============ =============
Net loss per share $ * $ *
============ =============
</TABLE>

* To be provided by amendment.

<PAGE>

EXHIBIT 21.1
------------

Subsidiaries of the Registrant
------------------------------

Jurisdiction of
Name Incorporation
---- ---------------

Influence Medical Technologies, Ltd. Israel

<PAGE>
EXHIBIT 23.2

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the inclusion in this registration statement of Influence, Inc.
and Subsidiary (the "Company") on Form S-1 of our report dated August 15, 1996,
on our audits of the financial statements of the Company. We also consent to the
reference to our firm under the captions "Selected Financial Data" and
"Experts."

COOPERS & LYBRAND L.L.P.

New York, New York
August 16, 1996

<PAGE>
<ARTICLE> 5
<CIK> 0001019063
<NAME> INFLUENCE

<S> <C>
<MULTIPLIER> 1,000
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1996
<CASH> 826
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,087
<PP&E> 429
<DEPRECIATION> 22
<TOTAL-ASSETS> 1,494
<CURRENT-LIABILITIES> 623
<BONDS> 0
0
7
<COMMON> 4
<OTHER-SE> (139)
<TOTAL-LIABILITY-AND-EQUITY> 1,494
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 1,468
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (3)
<INCOME-PRETAX> (1,465)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,465)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,465)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0

</TABLE>